Quick Take

DXC Technology (DXC) announced it has obtained Virtual Clearness for an undisclosed amount.

Virtual Clarity runs as IT-as-a-Service [ITaaS] change advisory companies.

With the offer, DXC is highlighting its just recently announced refocusing on enterprise IT innovation stack service offerings as the company sheds its non-core companies to reignite incomes development.

Target Business

London, UK-based Virtual Clearness was founded in 2008 to supply company with ITaaS improvement advisory services.

Management is headed by CEO Steve Peskin.

Virtual Clearness’s primary offerings include:

According to a marketing research report by IBIS World, the IT consulting services industry in the US is predicted to reach $484 billion in 2019 and is anticipated to grow due to increasing corporate revenue.

This represents a projection CAGR of 4.2% between 2014 and 2019.

The market is highly fragmented, with low capital requirements to go into. The market has seen increased debt consolidation is some respects due to larger companies getting smaller ones to construct out their offerings as clients look for fewer suppliers amid the increasing intricacy of IT environments.

Acquisition Terms and Financial

DXC didn’t disclose the acquisition price or terms and didn’t submit a form 8-K or provide a modification in monetary guidance, so the deal was most likely for a financially non-material quantity.

An evaluation of the firm’s most recent published monetary results indicate that as of September 30, 2019, DXC had $2.9 billion in cash and equivalents and $20.6 billion in overall liabilities, of which $7.7 billion was long-lasting debt.

Free capital for the six months ended September 30, 2019, was $1.27 billion.

In the previous 12 months, DXC’s stock rate has dropped 44.4% vs. the U.S. IT market’s increase of 25.7% and the overall U.S. Market’s growth of 13.1%, as the chart and business occasions graphic suggests below:

Source: Merely Wall Street

Earnings surprises have been positive in all twelve of the last twelve quarters, even as profits have fallen more just recently, as the cart reveals listed below:

Source: Looking For Alpha

Analyst sentiment in current incomes calls has actually dropped significantly, according to a linguistic analysis shown here:

Source: Sentieo

DXC got Virtual Clarity for its focus on massive enterprise IT optimization processes.

As DXC president and CEO Mike Salvino stated in the deal announcement,

Virtual Clarity is a strong fit with our growth method with proven know-how in IT improvement and cloud migration. The business complements and enhances DXC’s abilities in cloud, platforms and IT modernization, making it possible for DXC to help our customers with their digital change journey and improve their business outcomes.Virtual Clearness is

focused on the essential verticals of Financial Solutions, Healthcare, Production and Telecom.

We don’t know how much DXC spent for the deal, but it is in the context of DXC’s shedding of non-core possessions representing 25% of its total revenue base and refocusing on the enterprise IT chances.

So because light, the acquisition is justifiable and within the firm’s current focus area on providing more integrated service offerings to its consumers.

In addition, the Virtual Clearness offer underlines DXC’s intents to expand its ITO (IT Outsourcing) company in response to client need.

DXC’s turnaround story remains in its early stages, however it appears management ‘gets it’ and is taking actions to focus its efforts on its enterprise innovation stack service offerings.

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Disclosure: I/we have no positions in any stocks pointed out, and no plans to start any positions within the next 72 hours. I wrote this short article myself, and it reveals my own opinions. I am not getting payment for it (other than from Seeking Alpha). I have no business relationship with any business whose stock is discussed in this post.