CSC cuts 5,000 job cuts as it considers sale

Computer Sciences Corporation, the US information technology services provider, said on Tuesday it was exploring a sale of the company and would cut 5,000 jobs as business lagged behind in Europe in particular.

Los Angeles-based CSC has been seen as an acquisition target for the past six months. Its share price rose 4.6 per cent to a 52-week high of $59.92 in early New York trading.

The company said it was exploring “strategic alternatives to enhance shareholder value, including a potential sale”. But it warned there was no assurance the process would result in a transaction. Goldman Sachs has been retained as its financial adviser.

CSC also announced a restructuring that it expected would significantly improve cash flow and earnings. Van Honeycutt, chief executive, said: “For some time it has been apparent to us that there is excess capacity in certain geographies, particularly in Europe.”

CSC said it would eliminate 4,300 jobs by the end of its fiscal year in March 2007 and a further 700 positions in fiscal 2008, a total of about 6 per cent of its 80,000-strong workforce. Most of the cuts would be in Europe, where it has 10,000 workers in the UK and is one of several outsourcers involved in a £6.2bn (€8.9bn) National Health Service project.

The restructuring will result in estimated charges of $345m (€285bn) this year and $30m next year, but savings of $150m this year and $300m in fiscal 2008.

CSC, which had a market capitalisation of $10.68bn at Monday’s closing price, was first reported to be considering a sale last October. Carlyle and a consortium of private equity groups including Blackstone, Texas Pacific Group, and Warburg Pincus, looked at CSC, as did Lockheed Martin, the aerospace and defence company. EDS was also thought to be a possible buyer and Hewlett-Packard has been linked with the company.

CSC deals mainly in large-scale IT outsourcing contracts with business and government customers, including the US military and the Federal Aviation Authority. However, the vogue for all-encompassing IT outsourcing deals has subsided in favour of more specialised contracts, while outsourcing to lower-wage countries has become popular.