CSC share buy-back sends “wrong signal,” analysts warn

IT services provider CSC has failed to find a buyer and has launched a massive share buy-back in a move that sends “the wrong signal”, industry analysts have warned.

IT services provider CSC has failed to find a buyer and has launched a massive share buy-back in a move that sends “the wrong signal”, industry analysts have warned.

CSC runs one of the five NHS National Programme for IT contracts, covering the north west of England and West Midlands. It also signed a new five-year $1.9bn (£1.1bn) outsourcing deal with BAE Systems in May.

The firm’s directors announced the repurchase of up to $2bn of its shares after failing to find a buyer in the past three months.

Ovum analyst Richard Holway said, “One has to conclude that no buyer thought that CSC was actually worth much more than its then-current share price to enable a bid to be tabled which stood a chance of gaining shareholder support.”

Holway said potential purchasers from within the IT services industry would probably have been aware of “the singular lack of success of previous ‘mega deals’ in the sector”.

He added, “Many of the obvious trade candidates to purchase CSC are not in the finest state themselves to go embarking on a venture of this magnitude and risk.”

The move also sent “the wrong signal”, Holway said.

“It gives the impression of a company that has given up aspirations for growth; preferring instead to concentrate on wringing as much cost saving, and therefore profit, from a stagnant revenue base.”

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