DXC Technology Company (DXC - Free Report) , formed through the merger of Computer Sciences and the Enterprise Services business of Hewlett Packard Enterprise (HPE - Free Report) recently expanded its ties with VMware (VMW - Free Report) at VMworld 2017.
The two entities are coming together to debut the latest DXC Managed Cloud Services supported by VMware's next generation hybrid cloud platform. This contract will enable DXC’s clients to run VMware software (vSphere, Virtual SAN and NSX) on the Amazon.com’s (AMZN - Free Report) Amazon Web Services (AWS) to deliver enhanced performance for networking customers. Furthermore, it will offer users an integrated hybrid cloud solution, functioning much like a software-defined data center (SDDC). However, financial terms of the deal were kept under wraps.
Per DXC, by this conglomerate "we provide our clients the choice of both on-premises and cloud solutions on existing virtualized applications. DXC's Hybrid Cloud Service is a true accelerator for enterprises wanting to modernize and optimize existing infrastructures in a flexible consumption model, while embracing the open services of the public cloud."
The move comes at a time when DXC is strengthening its position in the virtualization server market. The company is expanding its expertise from just IT services to now include networking as well. We believe that the partnership will enable DXC to offer an efficient and improved hybrid IT environment to drive performance.
The VMware Cloud on AWS will ward off difficulties while setting up a mature virtualized cloud-based infrastructure. This in turn will help DXC to expand existing networking-based infrastructure with the benefits of the VMware’s hybrid cloud offerings.
VMware remains one of the leading companies in the virtualization and cloud computing space. With such partnership, DXC is poised well to benefit from the increasing adoption of cloud-based solutions. Per a Gartner report, global spending on cloud technology is expected to increase 25% annually over the next few years, which will result in higher demand for virtualization capabilities.
DXC Technology has outperformed the industry since it started trading on the NYSE on Mar 31, 2017. The stock has returned 22.9%, while the industry gained 12.1%.
Post-merger, DXC Technology has become the world’s second largest end-to-end IT services providing company after Accenture plc. We believe that the merger has opened up avenues of growth for the combined company. Following the footsteps of Computer Sciences, DXC Technology may be seen making strategic acquisitions to enhance portfolio, which will likely drive growth over the long run.
Nonetheless, the market is very competitive with companies like CACI International Inc. and Accenture, which could hurt DXC Technology’s top and bottom lines. Additionally, a challenging macroeconomic situation and uncertain IT spending environment remain other headwinds.
Currently, DXC Technology carries a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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