Virginia-based Computer Sciences Corp. (CSC) recently announced that it has acquired privately held pure-play software testing and quality management service provider, AppLabs Technologies Private Limited for an undisclosed amount.
The acquisition will enable Computer Sciences to provide application testing services in the high growth discrete testing market, supporting the company’s multi-year strategic growth plan.
Post acquisition, Computer Sciences will gain access to the strong portfolio of emerging technologies and proprietary methodologies and tools as well as the specialized sales force of AppLabs, which will significantly enhance CSC’s capabilities in application testing services and also shorten the time-to-market.
Further, AppLabs complements CSC’s expertise in Financial Services, Healthcare, Manufacturing, Chemical, Energy and Natural Resources and Technology and Consumer verticals. Although the benefits have been mentioned in detail, the financial terms of the deal were not disclosed.
We believe CSC is entering the testing and validation services market at the right time. As per data provided by the research firm IDC, the independent testing and validation services market is growing faster than the IT services market and is forecasted to increase at a compounded annual growth rate (CAGR) of 21.0% through 2013. We believe that CSC, with its enhanced technical expertise will emerge as a major player in this segment.
This apart, Computer Sciences’ foray into the health care space dates back to December 2010, when it acquired privately held information technology outsourcing company Image Solutions Inc., 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. Leveraging its capabilities, Computer Sciences has already strengthened its footprint in the related industry. The healthcare industry offers new opportunities for the company, and the company is undertaking various initiatives to expand its business in that segment.
Moreover, CSC’s Bearing Point acquisition supports the company’s multi-year strategic growth plan by expanding its presence in Brazil. The operation will enhance CSC's ability to support existing customers with a presence in Brazil, gain additional new clients from BearingPoint and position it to further pursue and win new business in the region.
The company reported decent first quarter 2012 results. However, we are 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).
Moreover, with government orders expected to dry up to a certain extent and the NHS (National Health Services) realization getting delayed, things look difficult for the company. tTe demand for the company’s products in Europe is also not encouraging for the upcoming quarters.
Currently, Computer Sciences has a Zacks #5 Rank, implying a short-term Strong Sell rating.
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