Computer Sciences Corporation: Placing Bets
Computer Sciences Corporation, the multinational and based out of Falls Church VA, provides IT services. But more importantly, it was the recent victim of a JANA Partners' push for a split.
The company recently split into two. JANA took an interest in CSC earlier this year, but did decrease its stake recently to 5.7mm shares, down to 4.1% - selling off 1.6 million shares from October to November. JANA is still a major shareholder and supporter of the split.
CSC has split up its commercial and public sector businesses. Its public sector was merged with SRA; the new name of this company is CSRA.
Breakdown of Two Companies
CSC shareholders have an 85 percent stake in the new company. Shareholders of SRA, a majority shareholder in that company named Providence Equity Partners, owns the rest of the 15 percent.
This firm was also instrumental in getting the acquisition from CSC and helping through with the merger between the two companies that formed CSRA. There are 19,000 employees at CSRA and they are still currently based in the old operations of CSC. The company is worth $5.5 billion.
Both Providence and JANA will guide CSRA, their new CEO will be Larry Prior who had run CSC's (NPS) sector since late last 2014. SRA's very own vice president, David Keffer will become the new CFO of CSRA. Sales in the (NPS) sector fell by 7.1% in the most recent Q3. But things are still looking up for this newly split company opposed to CSC.
Sales have fallen ~9% during the last year of 2015 and operating income fell to $591 million, a decline of ~13%. Both the new CRSA Company and CSC have faced some downfalls, but the better option?
Which is the Better Buy for Investors?
CSC will have a quarterly dividend of $0.14 per share. CSRA is trading at ~$29, in the infancy of being a new company. The quarterly dividend amount for CSRA will be $0.10. There is also a new plan for a share buyback of $400 million to be carried out over the next four years.
Obviously, CSC is the more established company with a higher market cap and more employees and a slightly higher payout for dividends. But don't discount the potential in the newly formed CSRA; with their leadership and the backing of Providence Equity Partners, they stand the chance to outpace their own mother company.