Computer Sciences Course Tough to Follow
The past six weeks have been a wild ride for Computer Sciences (CSC), as news of a potential buyout was followed quickly by the talks' collapse.
Now that the dust has settled, enthusiasm for the company and its stock has similarly waned, although the technology services firm's future is not necessarily all doom and gloom. Shares of Computer Sciences are trading around $50, down about 17% from a more than four-year high of $59.90 reached Nov. 1 at the zenith of the takeover rumors. That's still 10% higher than the stock price before news of a potential takeover broke Oct. 24.
"One of the questions probably still out there is, are they still a potential takeover target, or will this go away and they'll just continue on," says Chris Ambrose, a research director for Gartner who covers IT services and outsourcing.
UBS analyst Adam Frisch believes other companies are likely to be interested in acquiring CSC because the extent of the negotiations suggests management wants to sell. Alternatively, if all talks are over, CSC could find other uses for its cash and debt capacity such as an acquisition or share repurchase, which could be accretive to earnings, Frisch wrote in a recent note. (Frisch has a neutral rating on CSC and his firm has done investment banking with CSC.)Computer Sciences won't comment on takeover speculation. Other investors and analysts doubt that interested buyers exist. They don't understand why anyone would be interested in CSC's commercial business, which has shown lower growth than the company's more lucrative federal segment. The Wall Street Journal reported that the negotiations reached a point where buyers -- Lockheed Martin (LMT) and three private-equity firms -- were discussing a price as high as $65 a share. Three weeks later, the talks stalled because CSC wanted Lockheed to buy its entire business and then sell off the commercial section to the private investors. Lockheed only wanted to buy the federal business and was fearful of taking on the risk of buying the whole company and then selling it off, according to the Journal, which cited unnamed sources in all of its stories.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV