DXC Technology is in a buying mood as it comes off a profitable fourth quarter and prepares to spin off a portion of its business into an independent publicly traded company.
“We will do some more acquisitions, that I can tell you,” CEO Mike Lawrie told investors during the company’s after-hours earnings call Thursday. “We have a pipeline of things we are looking at. You just don’t know when these things are going to close. They have their own lifecycle. Most of what we do classifies more as tuck-ins that are very consistent with our overall strategy of improving our digital offerings… I just don’t know when they’re going to occur and I know what the whole year impact would be on revenue.”
The Tysons Corner, Va.-based firm that provides information technology and consulting services to businesses and governments -- No. 11 on the 2017 CRN Solution Provider 500 -- said during the fourth quarter ending March 31, its revenue grew to $6.29 billion, a 4.3 percent gain compared with $6.03 billion in the prior year on a pro forma combined company basis. Net income was $565 million for the fourth quarter, compared with a $138 million net loss in the prior year period.
“Our fundamental priorities as we look out over the next 12 to 18 months is we want to continue to drive productivity and the quality of our service delivery,” Lawrie said. “That is still the major cost element in our business. The degree that we can improve productivity and continue to see improved service levels, that has an enormously positive impact on our business.”
DXC said it plans to invest $200 million to $250 million in savings into the continued deployment of Bionix, the company’s automated IT service product, enhancement in digital workforce capabilities, agile and robotic process cababilites, and blockchain capabilities.
“Blockchain is a pretty pervasive technology, which is going to change a lot of how transactions are done,” Lawrie said. “Just in our portfolio, think of insurance claims, or think of healthcare claims, are areas where blockchain can certainly be leveraged. The supply chain would be another area. Wherever you have a lot of intermediary transactions. Blockchain is, I think, over time going to eliminate or reduce those intermediary steps from end to end transactions and payment systems.”
Born from the merger of Hewlett Packard Enterprise Services and Computer Sciences Corp, DXC started trading in March 2017. Lawrie said with their suite of analytic and automation tools, DXC can lower the cost of existing IT infrastructure, and then help the client reinvest the savings with other products in DXC’s catalog.
“That is the strategy: Help free up the money through a simplified more productive IT infrastructure,” he said. “Use those savings to reinvest in the digital platforms to help our clients on their transformation journey. That is the strategy. Hasn’t changed since our investor day. It now its beginning to get some real traction with our larger clients.”
DXC is putting the finishing touches on its own spin off at is takes its government services business and merges that with two other companies – Vencore and KeyPoint -- to form Perspecta, which is set to begin trading in June. Perspecta is expected to pay DXC $984 million for its U.S. public sector business.
Perspecta will combine that public sector business with Vencore’s $1.2 billion federal government consultancy, and KeyPoint’s $300 million background investigation service to create one of the five largest pure-play U.S. government solution providers.
The new company will be led by Vencore President and CEO Mac Curtis, with DXC U.S. Public Sector Senior Vice President and General Manager Marilyn Crouther serving as the company's chief operating officer. Lawrie will chair the new company's board of directors, with Veritas Capital CEO and Managing Partner Ramzi Musallam also sitting on the board.
The deal will enable the new company to cross-sell consulting, cloud and analytics into DXC's legacy customer base and cross-sell infrastructure, application development and systems integration into Vencore's traditional base of clients.