CSC Taking Over Image Solutions - Analyst Blog

Virginia-based Computer Sciences Corp. (CSC) announced that it has inked a deal to acquire privately held information technology outsourcing company Image Solutions Inc. Financial details were not divulged. The deal is pending approval from Image Solutions' shareholders and is expected to be wrapped up by the end of this month.

The acquisition will enable Computer Sciences to advance in the health care space.  Founded in 1992, Image Solutions has become a recognized name in the field of electronic submissions of New Drug Applications. The company's flagship products like eCTDXPress and ISIPublisher help organizations to capture and manage e-records, thereby streamlining workflow and reducing costs.

Image Solutions' offerings will complement Computer Sciences' enterprise content management solutions. Computer Sciences will also secure a position in the industry with Image Solutions' Life Sciences industry exposure.

The acquisition will facilitate Computer Sciences to access Image Solutions' intellectual property, rich customer base and operating facilities. Moreover, Image Solutions' Chinese and Korean operations will strengthen Computer Sciences' Asian footprint.

Overall, we expect the synergy to attract new business from the health care industry, which would lead to revenue growth. However, Computer Sciences' unimpressive second quarter 2011 results keep us on the sidelines. The quarter's top line missed the Zacks Consensus Estimate, although the bottom line surpassed by a penny.

Despite the quarter's disappointment, we remain optimistic about the company's earnings outlook for fiscal 2011, based on its strong new business bookings, enhanced product portfolio, growing customer base and macroeconomic recovery.

However, contract delays are expected to keep a lid over revenue growth in FY11. Moreover, intense competition in the IT and cloud computing space from players such as Accenture plc (ACN) and Hewlett-Packard Company (HPQ) are concerns.

Currently, Computer Sciences has a short-term Hold recommendation, as is indicated by the Zacks #3 Rank.

 
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