Computer Sciences Wins $3-Billion Nortel Contract
Computer Sciences Corp. won a $3-billion contract Wednesday to provide technology support services to Nortel Networks for seven years, one of the largest such deals ever in the technology consulting industry.
The award should help the El Segundo-based company land new clients in the booming telecommunications and high-tech industries, analysts said. The deal with Brampton, Ontario-based Nortel also boosts Computer Sciences’ presence in international markets, where it trails archrivals IBM Global Services and Electronic Data Systems.
But for Wall Street, the most significant aspect of the contract was its sheer size.
“It’s pretty dramatic,” said Stephen McClellan, a Merrill Lynch analyst who follows the company from San Francisco. “A $2-billion, 10-year contract is viewed as a big contract, and that’s $200 million a year in revenue. Here’s a $3-billion deal over seven years, which is $429 million a year.”
In terms of total dollar value, the Nortel contract ranks among the 10 biggest contracts ever to provide information technology services to a private company. On the basis of annual revenue, though, it ranks among the top five, McClellan said.
Computer Sciences, also known as CSC, will support more than 75,000 desktop computers used by Nortel employees in 19 countries. CSC will also provide help-line support, manage Nortel’s computer infrastructure and help the company reduce its dependence on legacy computer systems built around mainframes that run Unix software. Nortel is the world’s second-largest telecommunications equipment supplier, behind Lucent Technologies.
When the contract goes into effect Oct. 1, CSC will inherit about 2,000 of Nortel’s existing information technology employees, who will continue to work with Nortel through the contract. CSC, which already has more than 60,000 employees worldwide, said it plans to keep the Nortel workers in their current locations and offer them comparable salaries and benefits.
The Nortel contract extends a winning streak for Computer Sciences, which has already announced $7.1 billion in new contracts since its 2001 fiscal year began April 1.
Investors Wednesday bid up Computer Sciences shares $2.88 to close at $70.69, a gain of 4%, on the New York Stock Exchange. CSC shares had lost about a third of their value since June, when the company warned of a slight slowdown in quarterly growth.
Nortel shares rose 75 cents to close at $72.75, also on the NYSE.
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