Computer Sciences Spruces Up

Updated from 9:11 a.m. EDT

Shares of Computer Sciences (CSC) moved higher Tuesday after the company readied itself for a possible sale.

The stock was recently up $2.33, or 4.1%, to $59.62.

The company said earlier Tuesday that its board has decided to explore strategic options that could include a sale, while also announcing a cut of about 4,300 jobs in fiscal 2007 and 700 workers in fiscal 2008. Most of the cuts will be in Europe, and Computer Sciences will record pretax restructuring charges of about $345 million in fiscal 2007 and $30 million the next year.

Computer Sciences said it made the decision to examine its alternatives following recent expressions of interest. The company has hired Goldman Sachs as its financial adviser.

One of those expressions of interest was apparently a three-party acquisition deal with private equity firm Blackstone Group and Hewlett-Packard(HPQ) that fizzled in January. After talks reportedly ended with no deal, Computer Sciences' stock slipped backward to near $50 before its recent two-month climb higher.

But Computer Sciences isn't alone. Earlier this year, it was reported that a group of buyout firms including Blackstone, Texas Pacific, Bain and Silver Lake were close to buying Affiliated Computer Services(ACS) for $8 billion. Those talks also ended with no deal.

However, that hasn't meant that eventual matches won't be made. For private equity firms, more mature tech companies like IT services providers represent attractive targets because they have modest but steady growth, little debt and a steady cash flow that allows firms to ultimately pay off what is usually a debt-leveraged acquisition.

As is customary in corporate announcements like Tuesday's, Computer Sciences said there was no assurance that studying its options would result in a transaction.

Meanwhile, the company said its job reductions are part of a program that will result in pretax savings of about $150 million in the current fiscal year and $300 million in fiscal 2008, excluding the charges. The company currently has about 80,000 employees.

"For some time it has been apparent to us, and to other companies in our industry, that there is excess capacity in certain geographies, particularly Europe," Chairman and Chief Executive Van B. Honeycutt said in a statement. "After lengthy consideration, we have decided that this is an appropriate time to deal with the issue through a restructuring. This action is designed to enhance shareholder value regardless of any strategic alternatives we may explore."

Computer Sciences was founded in 1959 and had revenue of $14.6 billion last year.

>To order reprints of this article, click here: Reprints