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4/7/2006
12:04 PM
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Rivals See CSC As Vulnerable With Potential Sale

Some observers are betting that Computer Sciences Corp. will be broken up and sold off in several pieces, with EDS and IBM as potential buyers of the commercial outsourcing business.

Computer Sciences Corp. management’s decision to officially put the $14.6 billion company up for sale could open the door for competitors to grab some new business.

“That will absolutely help our company,” said Neal Fischer, principal of Hershey Technologies, San Diego, pointing to CSC’s decision last week to hire Goldman Sachs & Co. to explore a potential sale. CSC also disclosed a restructuring that will result in the layoff of 5,000 employees, the majority in Europe.

Fischer and others said CSC’s latest move will likely hamper CSC’s ability to pick up new accounts, opening up opportunities for rivals. CSC would not comment. CSC already has lost one important contract: an IT outsourcing deal with San Diego County. Northrop Grumman in January said it won that $650 million, seven-year project.

Hershey Technologies, a $4 million solution provider specializing in document imaging, in some instances competes with CSC but it also partners with the integrator via subcontracts. Fischer said he does not believe the potential sale of CSC will jeopardize that business. “We have a specific area of expertise,” he said. “It is difficult for large organizations to develop experts in that subject matter in-house.”

Chantilly, Va.-based GTSI’s President and CEO Jim Leto also said he does not expect to see a big impact from the potential sale of CSC. “In the federal space, CSC is a traditional systems integrator, and we partner with CSC more than we compete with them,” he said. “Where we partner with CSC, we’ll just partner with whoever the acquirer is.”

Industry executives said CSC will likely be broken up and sold off in several pieces, with EDS and IBM as potential buyers of the commercial outsourcing business. In a statement released last week, CSC, El Segundo, Calif., said it has “decided to explore strategic alternatives to enhance shareholder value, including a potential sale of the company.” Reports of a sale of the company had been circulating for several months.

Arnie Bellini, the president of ConnectWise, a Tampa, Fla., solution provider and maker of the ConnectWise professional services software, said CSC is not an attractive acquisition candidate given the increasing competition from smaller, fast-growing managed service providers. “This is a more open market today where many smaller and more nimble solution providers can compete and win business,” he said.

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