CSC Stock Hurt by Bid to Remain Independent
The hope that a $2 billion buyback plan would boost its stock in the wake of a failed bid to find a buyer appears to be in vain, as Computer Sciences shares have failed to rebound in the past two weeks to previous levels.
On June 29, the El Segundo, Calif. outsourcer and systems integrator announced that its efforts to sell itself to another party were at an end, and that it would purchase 19 percent of its stock with the assistance of Goldman Sachs & Co.
Acquisition talks had boosted the companys stock price, which then dropped sharply on the announcement that there would be no acquisition.
News of the buyback buoyed the stock somewhat, but not to previous levels. CSC shares were trading at $50.66 on July, 17. The stocks 52-week high was $60.39, but the price fell to $48 on June 29 when the announcement was made that talks were over.
"They took themselves off the block and that drove the stock down. The market didnt fall for it. Its a lame alternative to being sold," said Bob Djurdjevic, president of Annex Research in Phoenix, Ariz.
"CSC management is tired of running the business. They want to go and play golf. They are out of ideas and out of zeal or zest to run the business. As a result, theyve been trying to sell themselves. But at the price theyre asking, there are no takers," said Djurdjevic.
Hewlett-Packard had been discussed as an interested party, according to reports.
"The decision to repurchase stock concludes the Boards process to explore strategic alternatives, including a potential sale of the company, announced on April 4, 2006," the company said in a statement.
The share repurchases show that CSCs board has confidence in CSC as an independent company, the statement continued.
In addition, the share repurchases will improve the efficiency of CSCs capital structure, lower the cost of capital and increase earnings per share, the company said.
The company is carrying out a plan to lay off 5,000 workers, which was announced on April 4, 2006.
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