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DXC Technology staying on turnaround course

Days after the firm rebuffed the Atos takeover approach, DXC Technology shares Q3 numbers

February started with DXC Technology walking away from the prospect of an Atos takeover, and its freshly released third quarter results hint at a business that is determined to turn itself around under its own steam.

At the start of the week, DXC snuffed out the chances of moving forward with a reported $10bn offer from Atos, arguing the bid had undervalued the business, despite it being over market value at the time it was raised last month.

Instead, the firm said it felt confident it could keep going with its existing management team and approach.

“The offer was determined to be inadequate and lacking certainty in light of the value the board believes DXC can create on a standalone basis by executing our transformation journey,” the firm stated.

“DXC remains confident in its transformation journey focused on delivering for our people, customers, and shareholders.”

The SI’s president and CEO Mike Salvino has spent most of his tenure, since being appointed in September 2019, working on improving the firm’s debt position and casting an eye over its assets, with the decision made last year to sell off its UK healthcare operation.

The firm has been promoting the turnaround message for a while, and it’s added more meat to the bones of that argument, with its Q3 numbers for the three months ended 31 December showing that although revenues dropped by 15% to come in at $4.3bn, net income improved to $1.1bn from $90m in the previous year.

Making progress

Salvino said that the third quarter results showed “the good progress we are making executing on our transformation journey”.

“We have done well attracting talent, improving the environment for our people, strengthening our customer relationships, taking out cost without disruption, and winning in the market,” he said.

“I am pleased with the solid level of stability and momentum we are achieving and want to thank our people, customers, and shareholders for their support of the ‘new DXC’,” he added.

That support will be needed because the turnaround is taking time with revenue from the firm's global business services division down by 18.6% y-o-y to $1,921m. The infrastructure services business also took a hit with revenues of $2,367m down 11.1% compared to last year.

But the firm did take a serious axe to its debts, using a couple of sell-offs, including a US and UK healthcare operations, to help it reduce its overall debt by $3.5bn.

“The strength of the team, and the effectiveness of our transformation journey is clearly visible in our Q3 results. We see continued stabilisation of revenues and improving margins, as we bring the ‘new DXC’, which focuses on our people and our customers, to the market,” said Ken Sharp, chief financial officer at DXC.

DXC has been around since 2017, when it was created by the combination of US IT services giants CSC and HP Enterprise Services, with operations supporting customers in 70 countries.

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