CSC to be sliced in two

Plan confirmed to split services company CSC in two, as reported in Computing last week

Computer services company CSC has announced plans to split into two, as reported by Computing last week.

The plan will involve the US public sector business being floated off as an independent company, with CSC shareholders receiving shares in the new business, while the rump of the company will continue to serve businesses worldwide and public sector clients outside the US.

"CSC began its turnaround three years ago," said CSC CEO Mike Lawrie, formerly CEO of UK software vendor Misys.

He continued: "That turnaround has progressed strongly, and our focus now turns to positioning the business for long-term growth and leadership. The best way to accelerate that transformation is by separating the company into two businesses, each uniquely positioned to lead its market by focusing strongly on the needs of its clients."

"Our analysis shows significant benefits of going with a pure-play strategy," he added. "We expect this change to enable both businesses to enhance innovation and improve delivery, in ways that are consistent with the rate and pace of the markets they serve."

The company provided four main reasons for the separation:

"The 'Get Fit' phase of the company's turnaround has been successfully completed. Over the last three years, CSC has implemented a common operating model, streamlined its cost structure, improved its go-to-market performance and brought in proven leadership.

"At the same time, markets have evolved rapidly, with diverging opportunities and challenges. On the commercial side, clients seek partners with a deep understanding of their business who can help lead their digital transformations. In the US public sector, technology demands are increasing, and clients want providers with specific experience in government-focused innovation.

"By separating, each business will have the scale - among the largest in their respective categories - as well as the focus to meet unique customer needs and market requirements.

"The two segments have different growth profiles and cash-flow dynamics. The separation will allow both companies to better optimise their capital strategies and cost structures, and will provide investors with distinct long-term investment opportunities.

"The market for talent has become highly competitive. As two independent, focused and market-leading organisations, each business will be better positioned to recruit and retain the best IT talent," according to the company's announcement.

Completion of the separation will not require a shareholder vote and will be tax-free for shareholders.