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IT SERVICES

Analysis of Computer Sciences Corp.’s First Half FY04 Business Results

War Is Great!

CSC Thriving in Global War Economy: Government Business Almost Doubled

PHOENIX, November 12 – “War is great!” - could be the new mantra of Computer Sciences Corp. (CSC), juxtaposing the “Allah Akhbar” (“God is great!”) chants by Islamic warriors.  It’s just that there is nothing idealistic or religious about CSC’s war profiteering.  The company’s federal government business is booming, especially the “death merchant” (Pentagon) portion.

Thanks to its acquisition of DynCorp earlier this year (see “Back to the Future,” February 2003), CSC’s U.S. government revenues have nearly doubled (from $772 million in second quarter of FY02, to $1.52 billion this year).  Revenues related to the Pentagon contracts more than doubled (from $449 million last year, to $985 million in the latest quarter).  This vaults CSC into the No. 6 position on the Pentagon Top 50 list. 

And CSC’s winning pace in Washington seems to be accelerating.  About 80% of its new contract sales in the latest quarter ($3.5 billion) were the federal government awards.  By contrast, only about $700 million of its new contract sales came from the commercial sector.

[snip]

CSC Stock Surges

Meanwhile, Wall Street lapped up the CSC second quarter report, boosting its stock by nearly 10%, just as it did nearly six months ago, following the company’s final FY03 release (see “Less Than Meets the Eye,” May 2003).  And it did it on a day when the market remained virtually flat (see the CSC vs. S&P chart).

[snip]

Stock Market Quirks

So given the foregoing, you’d think that CSC is the new darling of the stock market investors and traders?  Think again.  Hard.  It was another truly beleaguered company that has outperformed both CSC and IBM in the last six months.  Believe it or not, that company is EDS!  (see the second chart).

[snip]

Which of the following top six global IT services competitors has shown the best stock market performance in the last six months (in alphabetical order):

1.     Accenture

2.     Cap Gemini Ernst & Young

3.     CSC

4.     EDS

5.     HP

6.     IBM

The correct answer is No. 2 – CGE&Y.  This Paris-based contented has outperformed IBM, for example, by a six-to-one margin!  (see the chart below).

[snip]

"That's all she wrote," we're afraid, for those of you who are NOT Annex Research clients, and who are now reading the complete Annex Bulletin (7 pages in print edition), along with all charts which back up our story.

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Happy bargain hunting!

Bob Djurdjevic

For additional Annex Research reports, check out... 

2003: "War Is Great!" (Nov 13),  "Less Than Meets the Eye" (May 16), "Back to the Future" (Feb 5)

2002:  Analysis of CSC FY02 results (May 17, 2002), "A Disastrous Quarter!" (Apr 17, 2002), “Tough Times, Soft Deals,” (Apr 25, 2002)

A selection from prior years: Analysis of CSC calendar 2000 results (Mar 26, 2000), CSC's FY2000 Business Results (May 10, 2000), Business Is Humming Nicely (Nov 3, 2000),  CSC 3Q2K, CIO Survey (Feb. 29, 2000), CSC: A Mouse That Roars? (Nov 1998)

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Volume XIX, No. 2003-19
November 12, 2003

Editor: Bob Djurdjevic
Published by Annex Research
e-mail: annex@djurdjevic.com

P.O. Box 97100, Phoenix, Arizona 85060-7100
TEL/FAX: (602) 824-8111

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