Serg Nvns - Fotolia

CSC beats analyst expectations ahead of split

CEO Mike Lawrie confirms that split will take place at the end of the month

Computer Sciences Corp. (CSC) reported its second quarter earnings yesterday and it was a mixed bag of results.

Profit climbed to $167m, or $1.19 per share, compared to $151m in the second quarter last year.

Analysts had expected $1.14 per share, according to Thomson Reuters, so the bottom line was good news all round.

However, revenue fell by an alarming 12% to $2.71bn.

Revenue for Global Business Services declined by 3.7% in constant currency to $891m, while Global Infrastructure Services fell by 10.8% to $854m.

CSC’s top brass had been anticipating further declines in Global Infrastructure Services revenue and said that the results were in line with expectations.

CSC has been looking to pull an HP-style split for some time and on a briefing call with analysts, CEO Mike Lawrie said that the plan was on track to be completed by the end of the month

The idea is to separate the commercial and U.S. government divisions. The public sector business will be merging SRA for $390m (£254m). The new company will be named CSRA and will focus on federal and defence agencies, while the commercial firm will continue to manage Global Business Services and Global Infrastructure Services.

“During the quarter, we completed additional important steps on our journey to separation,” said Lawrie. “We filed amended versions of our Form 10, with updated information, including and related to our anticipated merger with SRA. We named David Keffer, SRA's Chief Financial Officer, as the CFO of the new Company. And we've also added a number of other key leaders, as well as additional members of the new Company's Board of Directors.” 

The separation will occur on a one-for-one pro rata distribution of shares, with CSC stockholders receiving one share of CSRA common stock for each share of CSC common stock held on November 18, 2015.

To prepare for the split, CSC has been hard at work, trimming the fat off existing operations and bolstering the commercial business with a string of acquisitions.

Costs have been cut by nearly half a billion dollars and the company acquired Fixnetix as well as Fruition Partners back in August.

“We’re creating a strong balance sheet, and a well-capitalized company that can take advantage of the opportunities that are out there,” said Lawrie at the time. “The message we’re sending here is, we’re beginning to really position the commercial business post-separation. And we think the business can grow.”

But not everybody agrees. Despite a strong turnaround under Lawrie’s command, CSC was late to the software-as-a-service party and is still has a long way to go before it can be considered one of the cool kids.

CSC shares remained unchanged in after hours trading on Wednesday but dropped slightly on Thursday to $66.86.

Read more on Finance and Credit