Computer Sciences Corporation (
) is streamlining its business operations. In order to focus on
its core offerings, CSC has agreed to sell its credit service
) for $1 billion. The business will generate $230 million in
revenue and 40 cents in earnings this fiscal year.
After deducting tax, CSC said it expects to have a total
inflow of $750 million to $800 million. From this, the company
plans to use $300 million to $400 million for share buyback,
around $300 million to $400 million in its pension plans and the
rest for general corporate purposes.
Previously, CSC had signed a business agreement with Equifax,
under which it exchanged credit reports. At the same time,
Equifax acquired an option to acquire its credit rating business
by August 1, 2013.
At times, companies do divest certain business units as a
strategy to use the capital in other lucrative businesses. These
divestments do not always need the shareholders approval and can
be carried out with the consent of the company's management.
We believe that investors would find the deal to be
beneficial. The market capitalization of the company increased to
almost $200 million, as the news of the cash inflow of $1 billion
issued by the company yesterday exceeded expectation. Prudent
usage of this cash will help the company to bolster its
This is a very effective move by CSC, as the company is
partially affected by the reduction in government orders coupled
with reduced business in the financial segment. Also, demand for
technology software and services are picking up in emerging
Despite considerable exposure to Europe, strained federal
budgets and stiff competition from
), CSC retains a Zacks Rank #1 (Strong Buy).
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