CSC Gets $1.6-Billion Motorola Contract
Computer Sciences Corp. said Thursday that it won a 10-year contract valued at about $1.6 billion to run most of Motorola Inc.'s computer systems, the largest outsourcing deal in terms of total dollars for the El Segundo firm in more than a year.
Under the arrangement, CSC will hire 1,300 Motorola employees and buy some of its machines. Motorola, based in Schaumburg, Ill., makes cellular phones and other electronic communications equipment.
CSC shares jumped $1.54, or 5%, Thursday to $33.37 on the New York Stock Exchange, their highest level this month. The company gave no estimate of the contract’s effect on earnings for its fiscal fourth quarter, which ends today.
Competition among CSC, IBM Corp. and other technology outsourcing companies is intense, and analysts said CSC may have benefited from turmoil at Electronic Data Systems Corp., which also was considered for the Motorola job.
The deal was a “positive surprise” for CSC and could add about 3 cents a share to the company’s earnings for its fiscal 2004, said analyst David Garrity of American Technology Research Inc. in Old Greenwich, Conn.
CSC spokesman Mike Dickerson said companies such as Motorola will continue to offload their information technology functions to save money in a slumping economy.
“Outsourcing remains a primary engine of growth for the entire information technology services industry,” Dickerson said.
Motorola had previously turned to smaller outsourcing deals as it tried to cut costs, said spokeswoman Margot Brown. She said the proposal from CSC was “fiscally attractive” and includes prices that will fluctuate with the use of some resources.
Motorola shares slipped 6 cents to $8.45 on the NYSE.
CSC has been managing some National Security Agency technology since 2001 in a 10-year contract valued at $2 billion to $5 billion. It is negotiating an outsourcing deal with the British mail system estimated to be worth $2.3 billion over 10 years.
Reuters was used in compiling this report.