Computer Sciences
Computer Sciences, The Virginia-based IT services provider  Courtesy: Computer Sciences

Tech services giant Computer Sciences considers breakup

May 15, 2015

Computer Sciences Corp. is on the verge of splitting itself into two businesses, according to a Reuters report.

The idea is to separate the information technology services giant (aka CSC) into one business that will serve government accounts, such as the U.S. Department of Defense and other federal agencies, and another that will sell to commercial customers, according to the report, which cites people familiar with the matter.

CSC shares rose nearly 4% to $67.09 Thursday night after the news broke.

A CSC (csc) spokesman said the company does not comment on rumors. Speculation of this nature is nothing new to CSC, based in Falls Church, Va.

In January, activist investor Jana Partners disclosed a 5.9% stake in the company, boosting its ownership to nearly 8%, according to Bloomberg News. Soon thereafter, there was talk that the Carlyle Group and Capgemini, the French consulting giant, were interested in buying all or parts of the services company. Any deal would be huge, CSC's market cap stands at approximately $9.5 billion.

Hewlett-Packard (hpq) and the Blackstone Group were reportedly interested in buying CSC back in 2006.

Traditionally IT services are seen as a lucrative business, which is why HP acquired EDS years ago and IBM purchased part of PriceWaterhouse's consulting business. Conversely, it is expensive to provide handholding to big IT customers. Basically, you have to spend a lot of money to make a lot of money. The EDS deal, for example, ultimately led to an $8 billion write-down for HP.

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