CSC Hits Q2 Expectations, Touts $900m Contract Upgrade.

Computer Sciences Corp, the number-five computer services firm reported $89.9m net second-quarter profits, yesterday, bang on Wall Street's expectations at 55 cents a share. Separately El Segundo, California-based CSC announced the upgrade of an existing outsourcing contract which it said would bring in extra $900m in revenue going forward.

CSC's net income for the three months to September 30 was up 22.7% from the $73m reported in the year-ago quarter - in line with the consensus of analysts surveyed by Wall Street pollster, First Call. Revenue increased by 15.1% to $2.13bn, compared to $1.85bn a year ago. This compares favorably with market-leading systems integration and outsourcing firm, IBM Global Services, a unit of IBM Corp, which last week announced revenue growth of 12% for the three months to September 30 over the year-ago period.

Unlike smaller mid-tier services firms, such as Ciber Inc, which have announced depressed revenue for the most-recent quarter, alongside profits warnings for the next, CSC said its breadth of contracts ensured sales remained buoyant amid declining returns from Y2K-compliance business. "CSC's wide range of services, business diversity and large base of long-term contracts enabled the company to deliver solid quarterly results in a Y2K-impacted information technology market," the firm said in an official statement.

The firm said that two quarters into fiscal 2000 it has already snagged contracts offering revenue of $5.3bn - surpassing the total $5.1bn value of contracts won during the whole of last year, excluding CSC's mega-contract with the US tax collection agency, Internal Revenue Service. A CSC spokesperson told ComputerWire yesterday that the firm expected to start earning significant revenue from the IRS contract in the first calendar half of 2000. They said the contract, which US federal representatives have said its worth multi-billion dollars, could work out to be CSC's biggest-ever earner over its 10 to 15-year lifespan. CSC is the lead contractor of a consortium, including IBM, Unisys Corp and Lucent Technologies Inc, charged with overhauling the IRS's monolithic computer systems.

Before the results announcement, yesterday, CSC announced an extension to its $1.2bn outsourcing contract with Pratt & Whitney to encompass the complete North American IT infrastructure for the client's parent company, US manufacturing conglomerate, United Technologies Corp (UTC). Under the new 10-year contract CSC will support 44,000 desktop PCs, help-desks; engineering workstations, networks, servers and mainframes across UTC's five business units: Pratt & Whitney; Otis Elevator; Carrier Corp; Sikorsky Aircraft and Hamilton Sundstrand. The expansion boosts CSC's revenue stream for the contract to $2.1bn, the firm said.

CSC is due today to formally sign an outsourcing contract said to be worth more than $644m over seven years with San Diego County, a spokesperson said. The contract is billed as the largest-ever US local government IT outsourcing contract. Number-two computer services firm, Electronic Data systems failed to clinch an outsourcing deal worth up to $1.5bn with the State of Connecticut in June after the state pulled out of negotiations citing concerns over value for money. CSC is also tipped during the current quarter to prevail over IBM Global Services, the other short-listed contender, for an outsourcing deal with number-three aerospace and defense firm, Raytheon Co, reputedly worth more than $1bn over an unspecified period. CSC was said to be close to agreeing a contract with Raytheon in the fall of 1998 and has had to endure a protracted and expensive tender period.

CSC chairman, president and chief operating officer, Van Honeycutt, said the firm was "comfortably" on track to show revenue of $9bn for fiscal 2000, discounting costs from its acquisition of fellow IT services and consulting house, Nichols Research Corp, announced in September. CSC's purchase of Nichols, which specializes in servicing US federal defense institutions, is due to be closed at the end of November and will be accounted for as a "pooling of interests" under which costs will be written off against the December quarter's earnings.

The firm said it had claimed $2.5bn worth of US federal government contracts during the first half of fiscal 2000. It said this market offered a future contacts pipeline worth a robust $22bn over the next 30 months.

Federal government contracts were the only vertical sector split out within CSC's earnings report. A spokesperson declined to put a figure on earnings from the nascent so-called e-business market, spanning web hosting services,, web content development and business-to-business e-commerce. Unlike rivals, EDS or IBM global Services the firm is without a dedicated business unit chasing contracts in this nascent sector. The spokesperson said CSC had recently commissioned its retired group president of consulting, Jim Faviano to look at the firm's e-business strategy, reporting directly to CEO Honeycutt. Faviano will make his recommendations by the end of the year.