CSC Gets A Contract Extension - Analyst Blog

CSC Inc. (CSC) recently received a five-year extension of the information technology (IT) outsourcing agreement with United Technologies Corporation (UTX). From this extension the company will receive an additional monetary benefit of $1.5 billion through December 2019.

As per the terms of the extension agreement, CSC will continue providing its IT infrastructure support to UTC across 22 countries, supporting 110,000 desktops as well as UTC’s server and mainframe infrastructure. UTC is expected to receive cost benefit from this service extension, while receiving quality IT support from CSC.

The company has been particularly successful at winning government accounts. A few days back, CSC won a mammoth deal worth $2.8 billion, with the Department of State (DoS) Bureau of Consular Affairs. As per the agreement, CSC will provide a range of visa-related business process support services, local stand-alone facilities, and oversight and management of visa-support services for U.S. embassies and consulates abroad. This contract was awarded for an initial period of 1 year, with an option of extension up to another 9 years.

The constant flow of new business strengthens the revenue base of the company in the coming quarters. We believe that CSC’s aggressive marketing, the high quality of its solutions and greater customer satisfaction are doing wonders for the company.

CSC reported decent third quarter results and provided a positive outlook for fiscal year 2010. The company is constantly growing through acquisitions that enhance its services portfolio and expand its operations in new markets. It has a steady flow of new business, especially in the government vertical and is financially sound.

While there has been quite a bit of positive news in recent times, it appears that 2 analyst tracking the stock has reduced estimates for the upcoming quarter, while 2 analysts have reduced its estimate for fiscal 2010, in the last 30 days. This may be attributed to the intense competition that the company faces in the IT and cloud computing space from both big and small players such as Accenture (ACN) and HP (HPQ). 
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