Zacks_Analysts' Blog : Spate of New Deals for CSC - Analyst Blog

Computer Sciences Corp. (CSC) recently renewed a 5-year information technology (IT) outsourcing contract with the Italy-based defense electronics company SELEX Galileo, valued at $200.0 million.

Per 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 the latter’s trust in Computer Sciences’ services.

SELEX Galileo is owned by an Italian conglomerate, Finmeccanica S.p.A. It works in the fields of defense, aerospace, security, automation, transportation and energy. We believe that a successful stint with SELEX Galileo will likely rope in more deals for Computer Sciences from the other verticals.

Apart from this, Computer Sciences has clinched another 5-year IT contract from the Australian Department of Defense. Under the terms of this contract, the IT major will develop and implement an electronic health information system for the Australian Defense Force (ADF).

For this purpose, Computer Sciences will implement advanced Web-accessible and military specific software known as EMIS into the ADF’s Defense Information Environment. Recently, EMIS Group plc, the chief supplier of clinical software to NHS GPs in the UK, was selected by CSC in Australia to provide a new electronic health information system for the Australian Defence Force (ADF).

Apart from the above deals, the company will also partner with software providers to develop host applications and provide support services and training for managing the newly formed e-health system.

We remain encouraged by Computer Sciences’ steady flow of deal wins, as they indicate the acceptability of its products. We are also encouraged by Computer Sciences’ third quarter results but remain apprehensive regarding its high debt burden.

Moreover, intense competition in the IT and cloud computing space with both big and small players such as Accenture plc (ACN) and Hewlett-Packard Co (HPQ) are concerns.

Computer Sciences currently has a Zacks #4 Rank (short-term Sell recommendation).