Technology major Computer Sciences Corporation (CSC) maintained its deal winning spree by securing the U.S. Citizenship and Immigration Services (USCIS) contract for providing support to the agency’s Office of Information Technology.
With a one-year base and two one-year options, the estimated total three year value of the contract is $290.1 million. This award falls under the Department of Homeland Security’s Enterprise Acquisition Gateway for Leading Edge Solutions (EAGLE) contract, originally awarded to CSC in 2006.
As per the terms of the agreement, the company is expected to provide information technology (IT) services to support USCIS mission-related operations. Moreover, this service includes full life-cycle support for all phases of systems engineering and development, production, software application operations, configuration management, training, service desk support and IT security.
The award is not the only contract win by the company in recent times. The company recently won two contracts worth $83.2 billion to provide management, operational and logistical support for its Mail Transport Equipment Service Centers (MTESCs).
These contracts are valid for seven years and come with a three-year base and two two-year options, respectively, with an estimated value 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.
CSC has a large project pipeline and continues to win new projects at regular intervals; the most recent one being the 5-year information technology (IT) outsourcing contract renewal from the Italy-based defense electronics company SELEX Galileo, valued at $200.0 million. Per the terms of the contract, Computer Sciences will extend its full range of IT services in support of SELEX Galileo’s IT eco-system.
This contract is indicative of a long-standing relationship between the two and SELEX Galileo's trust in Computer Sciences’ services. Moreover, CSC has a $2.9 billion information technology infrastructure management service agreement with Zurich Financial Services Group for a period of 10.5 years. We believe these contracts will further strengthen the recurring revenue model of the company.
The company reported decent first quarter 2012 results on the back of its new businesses. However, the 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) remains a concern.
Moreover, as government orders are expected to dry up to a certain extent due to spending cuts and the postponement of NHS (National Health Services) realization to future quarters, things look difficult for the company. Additionally, 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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