M&A

DXC to break out U.S. government revenue, CFO says

The April launch of global IT services behemoth DXC Technology also marked a re-entry of sorts into the U.S. government market for the Computer Sciences Corp. portion of the business.

CSC had spun out its government business and merged it with SRA International to create CSRA.

Now Tysons, Va.-based DXC plans to give investors greater visibility into the government business that was gained when CSC and HPE Enterprise Services combined.

Chief Financial Officer Paul Saleh told investors in a conference call Thursday that DXC plans to report U.S. public sector revenue as its own segment to restart the practice followed by CSC when it was still in the public sector market.

CSC's legacy commercial business was "aligned a little more readily" and the new DXC has "work that's underway right now" to make U.S. public sector a reportable business, Saleh told analysts on the call to discuss CSC's fourth quarter financial results.

"The USPS business... also has a different set of customers and different cadence of business," Saleh said. DXC currently operates the same two-segment structure as the former CSC: global business services and global infrastructure services.

The May 2016 announcement that CSC would merge into the enterprise services business of Hewlett Packard Enterprise touched off analyst speculation that now-DXC would look to sell or spinoff the U.S. government business.

Executives at DXC have since sought to tamp down talk of a potential divestiture since. U.S. public sector leader Marilyn Crouther told Washington Technology in April she sees the $2.9 billion business as a "key component with an opportunity for growth ahead."

That was preceded by CEO Mike Lawrie's comment to investors in March that he sees the segment as recording low-single digit growth "as we go forward" in a general environment of "more expenditures in the public sector" than the prior four years.

DXC anticipates U.S. government business to represent nearly 12 percent of total corporate sales. All public sector business will make up for 23 percent of DXC's overall revenue when including the $2.6 billion in international government revenue, DXC said in the March investor presentation.

About the Author

Ross Wilkers is a senior staff writer for Washington Technology. He can be reached at rwilkers@washingtontechnology.com. Follow him on Twitter: @rosswilkers. Also find and connect with him on LinkedIn.

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