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DXC Technology CEO: Sales Team 'Blown Away' By Combined CSC-HPE ES Partnership Network

DXC Technology CEO Mike Lawrie said clients have experienced no delivery disruption from the CSC-HPE Enterprise Services merger and have enjoyed an infusion of innovation and new ideas.

DXC Technology CEO Mike Lawrie said clients have experienced no delivery disruption from the CSC-HPE Enterprise Services merger and have enjoyed an infusion of innovation and new ideas.

The Tysons, Va.-based company said brought its combined sales force together in Dallas this week for a global kickoff. This comes just seven weeks after CSC and HPE ES officially joined forces to create a $26 billion solution provider with 170,000 employees worldwide.

"They [the sales team] were blown away by the partnership network we have put together with all of our strategic [vendor] partners," Lawrie told Wall Street analysts during an earnings call Thursday.

[RELATED: DXC EVP Mike Nefkens And CTO Dan Hushon On The AWS Opportunity, HPE Relationship And Competing Against Global Systems Integrators]

Clients are turning to DXC for both rock-solid delivery as well as assistance around innovating and navigating through the digital transformation process, Lawrie said. Customers have overwhelmingly signaled that they are looking to DXC for innovation and new ideas, Lawrie said, and love the company's tight bonds with top-tier suppliers like Microsoft, AT&T and Amazon Web Services.

"The door is open, and we have got brand permission to do this," Lawrie said. "Now it's up to you to walk through that door and take advantage of that opportunity."

Vendor partners, meanwhile, are excited about gaining access to a larger and more robust install base, Lawrie said. DXC has some 6,000 clients globally, about half of which sit in the health care, banking, energy, travel and transportation, and insurance industries.

Since April 3, DXC has unified its executive team in all of the company's geographies and named all of the leaders who will be part of the company's top six layers of global management, Lawrie said. The company has consolidated its delivery organization, Lawrie said, and is beginning to bring its offering organization together.

Agreements are in place with most of DXC's key suppliers, Lawrie said, which will enable the company to put a more centralized procurement place in place to make it easier for the company to manage supplier agreements in the way it desires.

DXC's combined billing system, financial system and Salesforce software have also worked perfectly since the first day of joint operations, Lawrie said. Plus the company is in the process of consolidating facilities in areas such as London, Lawrie said, where CSC and HPE ES will be moving out of separate facilities into a single, combined facility.

"I am really pleased with the integration effort so far," Lawrie said. "Our partners couldn't believe that, within seven weeks, things were operating the way they are."

DXC is also thinning its organizational structure and beginning to make some of its proposed workforce cuts, Lawrie said. The company has a "labor war room" in place that tracks the "surplus" created when each layer of management is named and proceeding accordingly.

Company executives meet at 7 a.m. ET every Thursday to track every new employee hire and departure, Lawrie said, making sure to note the geography, skill sets and level of the pyramid for each affected worker.

Prior to the close of the merger, CSC took "long overdue" cost-cutting and restructuring actions in Germany, according to CFO Paul Saleh. DXC has thus far focused its cost optimization efforts around internal labor, travel policy and aligning benefit plans, Saleh said.

The company plans to take a closer look at its use of contractor labor, Saleh said, as well as its spending on hardware and software. Labor cost cuts for DXC will begin this quarter and accelerate in coming quarters in accordance with local laws, Saleh said.

All told, DXC has said it expects to achieve $1 billion of cost savings by March 2018, with 70 percent of that coming from workforce cuts and supply chain efficiency.

"We are managing this thing very, very tightly so we know exactly what's going on," Lawrie said. "And then, we make adjustments as we go forward."

In CSC's final quarter of standalone operations, which ended March 31, the company reported that sales jumped to $1.89 billion, up 4.5 percent from $1.81 billion a year ago. That fell short of Seeking Alpha's projection of $1.94 billion.

Net loss climbed to $148 million, or $1.05 per diluted share, up 11.3 percent from a net loss of $133 million, or $0.96 per diluted share, the year prior.

On a non-GAAP basis – which excludes restructuring, transaction, integration and pension-related costs – net income rose to $167 million, or $1.15 per diluted share, up 83.5 percent from $91 million, or $0.82 per diluted share, a year ago. This beat Seeking Alpha's non-GAAP earnings estimate of $0.83 per share.

For all of CSC's 2017 fiscal year, sales jumped to $7.71 billion, up 7.1 percent from $7.11 billion the year prior. The company recorded a net loss of $123 million, or $0.88 per diluted share, down from net income of $251 million, or $1.78 per share, last year.

The earnings information pertains only to pre-merger CSC, and does not include the financial results of HPE Enterprise Services in any form. DXC will begin reporting results for the combined operations of CSC and HPE ES in the quarter ending June 30.

DXC Technology shares remained unchanged at $78.64 in after-hours trading on Thursday. Earnings were announced after the market closed.

CSC saw Global Business Services (GBS) sales soar to $1.04 billion, up 10.8 percent from $941 million the year prior thanks to contributions from recent acquisitions and momentum from the company's business process services offerings.

Global Infrastructure Services (GIS) revenue sunk to $846 million, down 2.3 percent from $866 million a year ago despite contributions from recent acquisitions and growth in next-generation offerings.

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