Computer Sciences Joins VFC - Analyst Blog

Virginia-based Computer Sciences Corp. (CSC) announced that it has signed a multi-year information technology (IT) services outsourcing agreement with leading branded apparel manufacturer and seller, VF Corp. (VFC). Financial terms were not disclosed.

As per the agreement, Computer Sciences will support VF Corp.'s service desk, network services and customer support service functions, and also manage its data centre services. The transition of VF Corp.'s existing IT systems to the new system is expected to be complete by the end of August 2011.

VF Corp. deals in global brands such as Wrangler, The North Face, Lee, Vans, Nautica and 7 For All Mankind. We believe this diverse portfolio and a strong balance sheet should enable it to capture future growth opportunities.

The agreement will prove to be beneficial for both the companies, in our view. Computer Sciences' IT services will improve efficiency and speed in managing data and executing orders, which will help VF Corp. in attaining future growth. Further, VF Corp.'s success could lead to stronger ties between the two. Moreover, it could spur similar deals from other apparel/textile industry, increasing Computer Sciences' revenue diversity.

Computer Sciences is scheduled to announce its second quarter fiscal 2011 results on November 10, but we do not see substantial variation in analyst estimates at this point. Analyst reservations despite the solid product portfolio, valued customer base and geographical diversity could probably be due to sluggish IT outsourcing bookings and weak order renewal rates for.

Moreover, intense competition in the IT and cloud computing space from players such as Accenture Inc. (ACN) and Hewlett-Packard Co. (HPQ), as well as uncertain demand trends in Europe are concerns.

Currently, Computer Sciences has a short-term Sell recommendation, as indicated by the Zacks #4 Rank.