Claiming to be in the third year of a turnaround, Computer Sciences says it's time to split its federal from commercial service businesses.
The latest reports were on the money: Technology services vendor Computer Sciences Corp. is going to split itself into two companies.
This news, along with a special $10.50 per share dividend to be paid out by fall, was announced in advance of the company’s fourth quarter financial call on Tuesday.
After the corporate bifurcation, approved by the company’s board, CSC CSC Global Commercial will focus on Fortune 1000 companies—consulting with them on information technology infrastructure and their cloud strategies. That entity had $8.1 billion in revenue this fiscal year and more than a thousand employees, the company said in a press release.
Other than consulting, the current CSC offers its own VMware-based cloud computing platform for customers.
CSC U.S. Public Sector would concentrate on federal, state government accounts, and the various defense agencies. That business had $4.1 billion in revenue and 14,000 employees, according to CSC.
Rumors of a break up have circulated for a while, with Reuters breaking this news last week. Some CSC watchers at that time wondered what the benefit of an official split would be given that the commercial and government businesses were run pretty much separately anyway.
Activist investor, Jana Partners, which took a 5.9% stake in CSC early this year, issued a statement in support of the strategy, which it said will “unlock shareholder value.”
In a statement, Mike Lawry, who was named CEO of CSC in 2012, said the company is in year three of a turnaround, adding:
But corporate divorces are in the air. HP, which is also in a self-proclaimed turnaround, is in the process of splitting itself into a PC-and-printer company and an enterprise technology and services company. CSC is seen as a savvy provider of tech services which can be a lucrative business—provided costs can be kept in line. Basically, to make money providing services and support to big customers, takes a lot of money.
CSC has also dealt with more than its share of angst of late. Last week, the company said it was suing Eric Pulier, the former CEO of Servicemesh, a company it acquired for its multi-cloud management expertise two years ago for about $260 million. It alleges that Pulier violated its code of conduct.