DOD drives CSC earnings growth

Computer Sciences Corp.’s federal revenue grew 4.5 percent in the first quarter of the company’s 2006 fiscal year, with Defense Department business leading the way.

For the quarter ended July 1, CSC generated $1.22 billion in federal government revenue, compared with $1.17 billion for the year-earlier quarter. DOD-related revenue grew 9.4 percent to $793.9 million from $725.8 million last year. Civil agency revenue declined 6.5 percent to $376.7 million from $402.8 million last year.

Donald DeBuck, vice president and controller at CSC, attributed the decline to some of the company's projects at civilian agencies either slowing or coming to completion.

Paul Cofoni, former president of CSC's Federal Sector, resigned in late July.

Looking ahead, CSC Chairman and Chief Executive Officer Van Honeycutt, said the company’s federal opportunity pipeline in the next 20 months stands at $31 billion. About half that amount, he added, is currently scheduled for award during the company’s 2006 fiscal year.

“The pipeline of opportunities for our federal business continues to be robust,” Honeycutt said during the company’s earnings teleconference.

DeBuck cited business process outsourcing as a significant growth opportunity for the federal business, given the government’s push to streamline administrative functions. In such outsourcing, a customer offloads functions such as human resources and procurement to an outside contractor.

Overall, CSC’s first-quarter revenue grew 8.6 percent to $3.58 billion, compared with $3.3 billion last year. Diluted earnings per share increased 20.6 percent to $0.70 for the quarter, compared with $0.58 last year. The sale of discontinued operations contributed to the earnings jump. The company’s stock dropped about 2.5 percent to $45.69 in mid-morning trading.

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