Revenue Up, Earnings Down For CSCRevenue Up, Earnings Down For CSC

Fueled by its IT outsourcing business, Computer Sciences Corp. (CSC-NYSE) Thursday reported $68.2 million in earnings on revenue of $2.77 billion for its second quarter. While revenue was up more than 10% from the $2.5 billion reported a year ago, earnings were down sharply from the $109 million a year ago.

Global outsourcing revenue from commercial clients grew to $2.1 billion for the period ending Sept. 28, up more than 12% from a year ago. Revenue from U.S. government outsourcing rose to $660.6 million, up more than 6%. Revenue from Department of Defense assignments rose nearly 9%, to $397.6 million.

CSC signed $5.3 billion in new business for the quarter, with $5 billion of that coming from an outsourcing contract signed in August with the National Security Agency. Under terms of the 10-year NSA project, CSC, General Dynamics, Keane Federal Systems, Logicon, and Omen will take the lead in providing secure and nonsecure telephony and network services, distributed-computing services, and enterprise and security management of the non-mission IT infrastructure at NSA headquarters and surrounding offices.

CSC's success in winning government outsourcing contracts is offsetting the service provider's weakness in the commercial sector, says Karl Keirstead, Lehman Brothers' analyst. About 80% of CSC's outsourcing contracts in its fiscal 2002 come from the government, compared with about 25% through the first two quarters of fiscal 2001. CSC CEO Van Honeycutt attributes this shift to an increased demand among government clients and their willingness to make outsourcing decisions more quickly this year.