CSC Closes Image Solutions Deal - Analyst Blog

Yesterday, Computer Sciences Corp. (CSC) wrapped up the acquisition of privately held information technology outsourcing company Image Solutions Inc. This marks Computer Sciences' progress in the health care industry. The acquisition was announced in December 2010. Financial terms of the deal were not disclosed.

Image Solutions is a recognized name in the field of electronic submissions of New Drug Applications. The company's flagship products such as 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 health care sector with Image Solutions' Life Sciences industry exposure.

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

The combined effort of Computer Sciences' cloud-based capabilities and Image Solutions' offerings could bring in integrated solutions, which may be expected to accelerate the approval process of new drug submissions and eventually ramp up the availability of new drugs. We believe the integration of Image Solutions will attract new business from the health care industry, leading to more revenue streams.

However, Computer Sciences' unimpressive second quarter 2011 results keep us on the sidelines. The quarter's top line marginally  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 on revenue growth in fiscal year 2011. 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 indicated by the Zacks #3 Rank.

 
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