CSRA CEO Says His Company Sees Opportunity In CSC-HPE Deal

Public sector solution provider CSRA, part of which was spun off from CSC six months ago, will weigh potential strategic opportunities arising from CSC's announced merger with HPE's Enterprise Services segment before it closes next year, its CEO said Wednesday.

"I know our board is tremendously interested in it,’ Larry Prior told investors on his company’s quarterly earnings call, ’and will consider it along with all the other strategic opportunities that will avail themselves in the market over the next year."

Prior called the merger a "true inflection point in the market," and congratulated Mike Lawrie, his counterpart at CSC, on making the deal. Prior said he’s happy the merger is not scheduled to close until March 2017 because it gives CSRA plenty of time to think about the opportunities the deal may present.

[RELATED: CSC, HPE Enterprise Services Merge To Form $26B Solution Provider Behemoth]

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"Mike threw a big rock in the pond – it’s a spectacular moment, and we will see how it ripples across our market," he said.

Falls Church, Va.-based CSRA, was formed in November 2015 after CSC spun off its $4.1 billion U.S. public sector business and merged it with its $1.4 billion competitor, SRA.

On a call following the release of CSRA's fourth quarter fiscal 2016 earnings report, Prior said his company has put most of the integration of the two companies behind it, and will move forward by continuing to invest in next-generation technology and take aggressive cost-savings actions.

In the last six months, Prior said CSRA has already "dramatically exceeded" its cost synergy goals and is ready to "compete fiercely in the federal IT marketplace."

"Our market is slowly returning to growth and our customers are increasingly adopting next-generation IT," he said. "These trends give us confidence in the direction that we are taking the business as we aim to execute at the intersection of growing vertical markets and compelling technology offerings."

The company posted mixed results for the quarter, beating Seeking Alpha's earnings-per-share projection (50 cents) by 2 cents. But the company missed revenue projections for the quarter by $20 million, reporting $1.29 billion, a drop of over 4 percent from the combined entity's revenue for same quarter in fiscal 2015.

Prior said CSRA has yet to record growth, but is taking aggressive cost-cutting actions that can allocate the right resources "to prudently invest in growth."

He said in the new fiscal year, which began April 2, the company will bid for more business, with a goal of servicing $16 billion in business a year, up from $10 billion.

Prior also said CSRA will continue to invest in in differentiated technology solutions and was recently recognized as one of three cloud-service providers - along with Amazon Web Services and Microsoft Azure - to achieve a high-level accreditation within the Federal Risk and Authorization Program (FedRAMP) Federal Information Security Management Act (FISMA), earning it the ability to service federal IT systems considered "high impact."

The company has also embarked on a new organizational structure, pruning the number of internal groups from six to four and creating a leaner organization with the intention of making new work easier to pursue.

Moving forward, Prior expects CSRA to push toward organic growth during the year thanks to its focus on efficiency, while differentiating itself with next-generation technology. He also said he expects to reap some of the benefits of a growing public sector market for technology.

Prior said more contracts are being awarded, and discussed by the federal government, creating market momentum. He added that he expects the market to continue to improve following the presidential election in November.

"For now," he said, "we are solidly focused on execution."