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Annex Bulletin 2007-25 June 13, 2007
Excerpts from CONFIDENTIAL CLIENT edition (Annex clients click here)
The Last of the (PC) Mohicans - Analysis of Dell's strategy changes; Linux, Wal-Mart
Updated 6/13/07, 8:00PM PDT
Analysis of Computer Sciences Corp.'s Fourth Quarter Results
New Broom Sweeps Clean
New Executive Team Takes Charge and Charges against Earnings; Yet Stock Down in After-hours Trading
SCOTTSDALE, June 13 - Van Honeycutt, Computer Sciences Corp.'s outgoing chairman, may still be technically in or near his chair (till July 31), but his legacy is already getting eroded by the new executive team, led by Mike Laphen, the new CEO (click on right thumbnail). Laphen had served as the company's COO for the last three years prior to being appointed CEO in late May.
"A new broom sweeps clean," goes an old saw. The new CSC leaders have done just that. They wasted no time taking charge and charges against earnings while sweeping clean the company's boardroom.
Their post-earnings teleconference was market by an unusual candor, which included some "mea culpa" statements, such as this one:
Stock Slips Despite Good Quarterly Results
Wall Street generally likes charges, so it traded CSC shares up 2.4% to $56 in regular on rumors about a good quarter and write-offs. But then investors turned around and sold the stock off, down 2.8% to $54.5 in after-hours trading, after the fourth quarter facts were disclosed. So our old adage "up on rumors, down on facts" once again came true.
Nevertheless, CSC shares are now still at about the same level as a year ago, when the company tried and failed to sell itself off, and then resorted to stock buybacks as its "plan B" strategy (see above chart).
Revenue Shortfall Sinks Shares
And what was so disappointing about the fourth quarter facts? Actually, not much. We thought it was a pretty good quarter. Revenue was a little light relative to Wall Street expectations, but new contract sales by far exceeded them, thus implying solid revenues and profits in the future. While revenue rose to $4.05 billion from $3.89 billion, it missed slightly Wall Street's average estimate of $4.1 billion.
Business Segment Analysis
U.S. government sector revenues increased 5% to $1.43 billion in the fourth quarter, up from $1.37 billion in fiscal 2006. The Pentagon-related business was $978 million, up over 6% from the year-ago total, while revenues from civil agencies were $415.1 million, down slightly compared to last year.
OutlookFor the first quarter, CSC projects revenue in the range of $3.7 billion to $3.8 billion, in line with analysts' current consensus estimate. The company expects earnings of 65 cents to 75 cents a share, excluding special items, vs. analysts' views of 76 cents.
"That's all she wrote," we're afraid, for those of you who are NOT Annex Research clients, who are now reading the complete Annex Bulletin, along with many tables and charts that back up our forecast.
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Happy bargain hunting!
For additional Annex Research reports, check out... Annex
Bulletin Index 2007 (including all prior years' indexes) Or just click on SEARCH and use "company or topic name" keywords. Volume XXIII, Annex Bulletin
2007-25 Bob Djurdjevic, Editor 8183 E Mountain Spring Rd, Scottsdale, Arizona 85255 The copyright-protected information contained in the ANNEX BULLETINS is part of the Comprehensive Market Service (CMS).
It is intended for the exclusive use
by those who have contracted for the entire CMS service.
For additional Annex Research reports, check out... Annex Bulletin Index 2007 (including all prior years' indexes)
Or just click on SEARCH and use "company or topic name" keywords.
Volume XXIII, Annex Bulletin
Bob Djurdjevic, Editor
8183 E Mountain Spring Rd, Scottsdale, Arizona 85255
The copyright-protected information contained in the ANNEX BULLETINS is part of the Comprehensive Market Service (CMS). It is intended for the exclusive use by those who have contracted for the entire CMS service.
The Greening of Big Blue - IBM to spend $1 billion on "going green"
Are We in "Buyback Bubble?" - Analysis of corporate stock buyback trends
To Buy (back shares) or Not to Buy? - Analysis of stock buybacks in corporate America
IBM Stock Still Grossly Undervalued (A preview of IBM first quarter business results]
Accenture Beats Forecasts, Again (Analysis of Accenture's 2QFY07 results)
The Value of pi (π) - Analysis of IBM System p and System i market and product strategies
The (T)ides of March Sink Markets Again - Analysis of global economic & investment trends
Capgemini Caps Great Year, Saves Best for Last (Analysis of Capgemini's fourth quarter business results)
EDS: On Sunny Side of Street (Analysis of EDS' fourth quarter business results)
CSC: Where Less Seems More (Analysis of CSC's third quarter fiscal 2007 business results)
Fujitsu: Sales Up, Profit Down (Analysis of Fujitsu's third quarter fiscal 2007 business results)
IBM Shatters Records (Analysis of IBM's fourth quarter business results)
IBM Stock Passes Century Mark (Analysis of Big Blue's Stock Performance)
Happy Days Are Here Again (Analysis of Top 20 IT leaders' latest stock market and business performances)
Globalization Accelerates (Analysis of United Nation's annual survey of global investments)
IBM: A $125-Stock? (An update to "From Small Acorns Mighty Oaks Grow")
Capgemini: Longest Sustained Stock Price Rise (An update to "By Leaps and Bounds")
HP: New King of the Hill (Analysis of HP's fourth quarter business results)
IBM: From Little Acorns Mighty Oaks Grow (Analysis of IBM's "State of the Union")
Capgemini: By Leaps and Bounds (Analysis of Capgemini's preliminary third quarter business results)
Fujitsu: Good Performance Gets Better, More Global (Analysis of Fujitsu's first half FY2007 business results)
IBM: A Slam Dunk Quarter (Analysis of IBM third quarter business results)
IBM: Services in a Box (Analysis of IBM Global Services' Ground-shifting Announcements)
Strong Comeback by IT Stocks in Third Quarter (Analysis of top 20 IT companies' market and business trends)
Stock Buybacks: A Fading Fad (Dell, erstwhile "King of Fluff," suspends its stock buybacks)
Capgemini: Growth Continues (Revenues, net profit up in double digits, margins also improve)
Power of Manpower (While others move to India, Russia... AMD invests in New York, hailing "phenomenal" quality of its labor force)
Ebb Tide Lowers Most Boats (Analysis of EDS' and CSC's latest quarterly results)
IBM vs. HP: A Tale of Two Blues (Both companies are doing well in business, but only HP is favored by Wall Street; Big Blue trying to change that now with its new "India Opus") [Annex clients click here]