Government Awards Continue for CSC

Technology major Computer Sciences Corporation (CSC - Analyst Report) recently announced that it has entered into a one-year contract worth $67.0 million with the U.S. Department of Homeland Security (DHS). The agreement bears a one-year and two six-month extension options.

The company has a long-term relationship with the DHS, spanning for almost 10 years. As per the terms of the recent agreement, CSC will provide program management, research and analysis, operations, maintenance, security and user access for VIS (Verification Information System), which is used by several USCIS (U.S. Citizenship and Immigration Services) programs, including the Systematic Alien Verification for Entitlements (SAVE) program and E-Verify.

Government awards keep flowing for CSC Corp., with the recent deal marking the company’s fourth government contract in the past two months. First, the company won a contract worth $25.0 million from the U.S. Department of State Bureau of Consular Affairs, to conduct consular operations in Tel Aviv department of Jerusalem.

Second, the company clinched an information technology (IT) outsourcing deal with Royal Berkshire NHS (National Health Services) Foundation Trust. The 7-year deal has a 3-year extension option, depending on the level of work accomplished. Third, the company also secured a contract from the U.S. Missile Defense Agency worth $80.0 million.

The continuous deal wins for the company ensure incremental cash flows. However, CSC is facing several headwinds in Europe and concerns linger regarding its ability to consistently improve its operating margin performance.

Winning deals is not new for this tech giant. But headwinds in its government business are actually affecting the company’s ability to execute on the deals that it is winning at regular intervals.

This apart, Computer Sciences’ disappointing second quarter 2012 results and stiff competition from Accenture plc (ACN">ACN) and Hewlett-Packard Company (HPQ">HPQ) in the IT and cloud computing space are concerning. Computer Sciences has a Zacks #5 Rank, implying a short-term Strong Sell rating.

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