CSC Sees Q2 Operational Improvement As Turnaround Continues

CSC's transformation remains a work-in-progress with the systems integrator reporting improved operating results for its second fiscal quarter, but declines in overall revenue and bottom-line profitability.

"We continue to jettison businesses that just aren't profitable," CEO Mike Lawrie said in a conference call with financial analysts Thursday.

While he said sales of "next-generation offerings" such as cloud and big data technologies and services are growing, it wasn't enough to overcome "headwinds" that are negatively impacting financial results.

[Related: Report: CSC Knocks On Private Equity Doors, Weighs Leveraged Buyout]

Revenue in the second quarter was $3.08 billion, down 3.4 percent in the same period last year. Net income for the quarter was $151 million, down almost 35 percent from one year earlier.

CSC, which has been restructuring and divesting itself of non-core businesses to boost profitability, played up the positive aspects of the quarter. Income from continuing operations was up 9 percent year-over-year to $177 million. Diluted earnings-per-share from continuing operations were $1.18, up 17 percent from the same period one year before.

Reports have surfaced in recent weeks that CSC, No. 4 on the CRN 2014 Solution Provider 500 list, has been exploring the possibility of a leveraged buyout with private equity firms.

Lawrie and other CSC executives on the earnings call did not address those reports. The closest hint Lawrie gave about the company's long-range plans came when an analyst asked about the possibility of splitting off CSC's North American public sector operations from the company's commercial businesses.

"As I've said many times on these calls, all options are on the table," the CEO said. "We're a public company [and] we're always going to look for the best way to drive shareholder value and continue to serve our customers and employees."

CSC is also playing in an increasingly competitive environment. Solution providers Accuvant and FishNet Security struck a deal Thursday to create a $1.5 billion information security services giant that will undoubtedly compete with CSC's cyber security and managed security offerings.

The second-quarter results included a 6.9 percent revenue decline in CSC's global infrastructure services operations to $1.04 billion compared to $1.11 billion one year ago. Those results were negatively impacted by "price-downs, restructurings and contract conclusions," according to the company, but included revenue growth from new lines of business such as cloud computing, desktop virtualization and big data technology and services.

Global business services revenue declined 1.9 percent to just over $1.0 billion, including a 3 percent decline in consulting-related revenue. "We still have a lot of work to do in this business," Lawrie said.

Revenue generated by the company's North American public sector business was down 1 percent year-over-year to a little more than $1.4 billion.

For all of fiscal 2015 CSC is forecasting that revenue will be either flat to slightly down from the $13 billion in revenue the company recorded in fiscal 2014. Earnings per share are now expected to be between $4.45 and $4.65 for the fiscal year, a 10-cent improvement from earlier guidance.