Computer Firm Signs Deal for ‘Outsourcing’
Computer Sciences Corp. said Monday that it signed a computer-services agreement with General Dynamics that will boost the El Segundo-based computer company’s revenues by nearly 20% and reduce its dependence on government contracts.
The deal is said to be the largest contract ever in the business of “outsourcing,” where companies farm out their information services work to concerns such as Computer Sciences.
Investors, encouraged by the news, bid up the price of Computer Sciences’ stock by $2.50 per share to a close of $62.125 in New York Stock Exchange trading Monday.
Under the agreement--effective Nov. 1 pending government approval--Computer Sciences will pay General Dynamics $200 million and in return will obtain the defense contractor’s three major data centers, including its personnel, buildings, equipment and software. Computer Sciences will also provide all the outsourcing services needed by General Dynamics.
General Dynamics has large data centers in Norwich, Conn.; Ft. Worth, Tex., and San Diego. These centers and 2,600 employees will be acquired by Computer Sciences.
Bruce Plowman, Computer Sciences spokesman, said the agreement is the “first large commercial contract in the market to emerge in the last couple of years.” It is expected to bring Computer Sciences $350 million in revenue in the first full year of operation, he said.
“This is a record-setting outsourcing contract,” said Merrill Lynch analyst Stephen T. McClellan. He said the contract is worth $3 billion over the next 10 years.
Computer Sciences is the largest independent professional services company in the computer industry.