Technology major Computer Sciences Corporation (CSC) has been on a deal winning spree in recent times. Recently, the company won two contracts worth $83.2 billion to provide management, operational and logistical support for its Mail Transport Equipment Service Centers (MTESCs).
These contracts have a time period of seven years and come with a three-year base and two two-year options, with an estimated of $83.0 million. CSC won these contracts during the first quarter of 2012. CSC will now operate 9 of the 15 MTESCs in the United States.
As per the terms of the agreement, CSC will provide program management, information systems support and logistical services. The contract agreement includes examination, routing, repair or recycle/disposal of mail transport equipment and the company will work to further improve equipment processing, repair and distribution functions.
Apart from winning business deals, the company recently witnessed a major inflow of fund from the settlement of a federal contract dispute. The case filed by Computer Sciences was pending with the Armed Services Board of Contract Appeals since November 2010. At that time, the government and Computer Sciences agreed to put their claims on hold and enter into non-binding discussions to resolve the claims and other issues related to the contract.
Under the terms of the settlement, Computer Sciences will receive a one-time cash compensation of $277.0 million as well as a five-year contract extension worth approximately $1.0 billion. The original contract for providing systems support will expire at the end of this year.
This apart, the Canadian arm of CSC recently inked a service agreement with Citizenship and Immigration Canada (CIC) for two years, with an option of extending it for another year. Financial details of the deal were not disclosed.
CIC is the department of the Canadian government that deals with immigration and citizenship. The department was established in 1994 following reorganization within the federal government.
Under the terms of the agreement, Computer Sciences will provide extensive support to facilitate the successful submission of visa applications from Latin America. The service will also add on-site client applications, which will lead to secure transmission and documentation of the application. This will also expedite Visa processing.
The company reported decent first quarter 2012 results on the back of its new businesses. However, we are apprehensive about intense competition in the IT and cloud computing space from both small and big players such as Accenture plc (ACN) and Hewlett-Packard Company (HPQ).
Moreover, with government orders expected to dry up to a certain extent due spending cuts and the postponement of NHS (National Health Services) realization to future quarters, things look difficult for the company. Demand for its products in Europe could remain gloomy in the near term.
Currently, Computer Sciences has a Zacks #5 Rank, implying a short-term Strong Sell recommendation.
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