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Keep Holding DXC Technology

Jun. 01, 2020 5:52 AM ETDXC Technology Company (DXC)21 Comments


  • DXC took a big goodwill write-down.
  • Turnaround and transformation still a work in progress.
  • Upside delayed by one to two quarters.
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DXC Technology (NYSE:DXC) rattled investor confidence when it announced a dividend suspension in its fourth-quarter earnings report. Selling volume surged beyond levels not seen since September 2019. At the time, DXC's stock was starting its descent from the $35.00 level. DXC is down around 5% since my last article here (link accessible by DIY Value and Seeking Alpha Premium subscribers). But the stock lost half its value since the February write-up.

With the previous 5.91% dividend yield wiped out, where do the company’s prospects stand?

DXC Technology

Massive Write-down

DXC reported a $13.79 a share loss because it included $14.99 a share in goodwill. It also recognized impairment, restructuring costs, and integration-related costs. The 76 cents a share pension and OPEB actuarial and settlement gains helped offset those losses. The company returned $214 million in dividends and $736 million in share buybacks in the fiscal year. Poor customer delivery and weakening customer relationships cost the company around $1 billion in the year. The company expects to lose a similar amount this fiscal year. This is due to customers ending their business with DXC.

In the next six months, DXC will feel the impact of the lost business. Conversely, CEO Mike Salvino said on the conference call that “the good news is that this fundamental problem is absolutely within our control and fixable. In fact, we're making good progress on bringing the new DXC to our customers, which should help stem future revenue runoff.”

Calling the problem fixable is not good enough for investors. Management said that it would address its challenged account with better results. Though it fixed 35 of the 40 accounts, two customers are leaving DXC, and three are still unresolved. The poor results suggest that the company does not have a strong enough moat. Plus, it is too exposed to the most sensitive sectors suffering from

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This article was written by

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