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DXC Technology to Buy Luxoft to Expand Digital Business

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DXC Technology (DXC - Free Report) recently signed a deal to acquire digital innovator Luxoft (LXFT - Free Report) , for about $2 billion. The transaction is anticipated to be closed by June 2019.

The amalgamation of Luxoft’s digital engineering capabilities and DXC’s expertise in IT modernization is expected to enhance customers’ digital transformation journey. Moreover, both the companies will be able to expand the reach of their services to each other’s customer base with the deal.

Mike Lawrie, chairman, president and CEO, DXC Technology was quoted saying, “Luxoft and DXC are highly complementary, and our shared vision of digital transformation makes this strategic combination a great fit for both organizations -- as well as enormously beneficial for our clients,”

Digital Transformation Drives Growth

The buyout is expected to give a boost to the digital solutions business of DXC Technology. Notably, the company is benefiting from strength in the Digital business, which reported 6.4% year-over-year higher revenues in the last reported quarter, driven by 1.9% growth in cloud infrastructure and 25% rise in digital workplace.

Per IDC, spending on digital transformation will reach $1.97 trillion globally in 2022, reflecting a CAGR of 16.7% during the period of 2017-2022. The research firm also predicted that all digitally transformed organizations are expected to generate at least 45% of their revenues from technologies adopted as a result of digital transformation.

These predictions make digital transformation all the more attractive to enterprises, driving them to adopt solutions, which will help accelerate the transition. These services and solutions, provided by DXC to its clients, are constantly being enhanced to boost client experience.

Acquisitions Bode Well

DXC Technology’s continued focus on acquisitions to expedite growth is helping it gain access to newer markets and technologies. Last year, the company made a number of important acquisitions.

The System Partners buyout is in sync with DXC Technology’s strategy of expanding reach in the Australian and New Zealand markets, and bringing about cloud-first approach to its IT operations.

It also completed the buyout of Molina Medicaid, a unit of Molina Healthcare (MOH - Free Report) , strengthening DXCTechnology’s ability to provide high-quality services to state agencies in the administration of Medicaid programs.

In March last year, DXC Technology acquired Australian Oracle (ORCL - Free Report) cloud partner M-Power Solutions, following which it bought Melbourne-based Microsoft partner, Sable37.

We believe that the acquisitions will further strengthen DXC Technology’s position as one of the leading cloud and IT service providers in the world. Moreover, the buyouts continue boosting the company’s revenues amid intensifying competition in the cloud computing market.

Currently, DXC Technology carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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