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5/24/2006
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CSC Reports Big Gains In Sales To Feds, DOD

Sales to the federal government and the Defense Department increased by double digits, but fourth quarter net income plunged 52% year-over-year to $199.4 million.

Computer Sciences Corp.'s fourth quarter earnings show how the company—officially on the block since April—could make an attractive target for technology outsourcers looking to bolster their business with the federal government.

Although CSC's fourth quarter net income plunged 52% year-over-year to $199.4 million, the company's revenues remained stable at $3.88 billion. What's more, its overall sales to the federal government during the quarter ended March 31 jumped 13% to $1.37 billion. Revenue from Department of Defense contracts climbed 22% to $919.5 million. CSC disclosed its quarterly earnings on Tuesday, and said the decline in net income was due in part to a series of one-time charges.

With its focus on highly sensitive, behind the scenes IT work at the military and domestic intelligence and law enforcement organizations like the FBI and the National Security Agency, CSC continues to benefit from Bush administration spending on the war on terror. A number of major defense and IT integrators, including Lockheed Martin, have expressed interest in acquiring CSC, though a deal remains elusive. "The concern is they could become shopworn," says a financial analyst who follows the company.

For its full fiscal year 2006, CSC said revenues increased 4% to $14.62 billion, while net income fell 22% to $634 million. Earnings per share rose 19% to $3.11. For fiscal 2007, CSC said it expects revenue to increase between 2% and 3%, and anticipates earnings per share to end up between $3.79 and $3.89.

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