Computer Sciences Corporation (CSC) recently won a contract from Educational Testing Service (ETS), a worldwide education provider. The contract is worth $200.0 million, spanning over a period of five-and-a-half-years.
As per the terms of the agreement, CSC will design systems to introduce new and innovative approaches to the way ETS leverages IT. Moreover, CSC will also provide cloud computing infrastructure including CloudCompute, the new infrastructure as a service (IaaS) architecture deployed in the CSC Trusted Cloud Datacenters.
Apart from the service mentioned in the terms of the agreement, the company is expected to provide additional services, which include service desk, end-user support, network support, distributed computing, security operations, disaster recovery and data center management services. CSC will utilize its worldwide delivery centers to complete the job.
The deal is consistent with the company’s deal winning spree in the recent past. In September this year, the company won a 10-year contract worth more than $900.0 million from a U.S-based global multi-brand commercial products manufacturer, which offers information technology and infrastructure managed services. So, it is safe to say that CSC has a major pipeline of deals, which will provide the much-needed support to its revenue stream.
The most recent project is the 5-year information technology (IT) outsourcing contract renewal from Italy-based defense electronics company SELEX Galileo, valued at $200.0 million. As per the terms of the contract, Computer Sciences will extend its full range of IT services to support SELEX Galileo’s IT eco-system.
Despite the constant influx of new deals, we are concerned at the stated of government orders, which appear to be dwindling due to spending cuts. The postponement of the NHS (National Health Services) realization to future quarters is a case in point. Additionally, demand for its products in Europe could remain sluggish in the near term.
Moreover, we are also apprehensive about the intense competition in the IT and cloud computing space from both small and big players such as Accenture (ACN) and Hewlett-Packard Company (HPQ). After considering the aforementioned, we may infer that things look difficult for Computer Sciences going forward.
The company has a Zacks #4 Rank, implying a short-term Sell rating.
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