Tracking CSC's Growth Trajectory

| About: Computer Sciences (CSC)

The habit of winning major deals and securing contract extension doesn’t seem to end for the IT major CSC Inc. (NYSE:CSC). The company’s information technology (IT) outsourcing agreement with Sempra Energy has been extended recently for another three years.

Under the extended agreement, CSC will continue to provide IT support to Sempra's California utility business unit and corporate center in Southern California, which will in turn provide support to the 11,000 desktop devices and operate the IT Service Desk. The company did not provide the pecuniary details of the contract extension.

Second in the line of recent deal wins comes the $317.0 million contract awarded to the IT major by the “National Oceanic and Atmospheric Administration” (NOAA). Under that agreement, CSC will develop a new weather modeling computer system for NOAA. This new technology will help NOAA to improve the accuracy of its climatic forecast.

We believe that through this deal, CSC has forayed into a new line of business, which is expected to generate huge volumes in the coming days, as government agencies and state weather departments across the globe are in the process of automating their weather forecasting technology.

The constant flow of new business strengthens the revenue base of the company in the coming quarters. We believe that CSC’s aggressive marketing, the high quality of its solutions and greater customer satisfaction are doing wonders for the company.

CSC reported encouraging fourth quarter results and provided a positive outlook for fiscal year 2010. Moreover, the company won $4.3 billion worth of new business awards during the fourth quarter. Of the three lines of business, North American Public Sector (NPS) accounted for $1.4 billion of new business wins, Business Solutions and Services (BSS) $0.8 billion and Managed Services Sector (MSS) $2.1 billion.

The company is constantly growing through acquisitions that enhance its services portfolio and expand its operations in new markets. It has a steady flow of new business, especially in the government vertical and is financially sound. On the other hand, the tough competition that the company faces in the IT and cloud computing space from big players such as Accenture (NYSE:ACN) and Hewlett-Packard (NYSE:HPQ) makes us cautiously optimistic on the company.