DXC Seeks to Sell Off Selected Business Units for $500M
DXC Technologies is seeking to sell off certain businesses that generate roughly $500 million in annual revenue. The asking price for the unloved assets: $500 million. A target valuation based on annual EBITDA multiples was not disclosed.
Those factoids surfaced in a DXC Technologies earnings call on February 2, 2022. Describing a cost-optimization effort, CEO Mike Salvino said:
“We have identified businesses with roughly $500 million in revenues that are not strategic and will not help us grow. Selling these businesses will improve our organic revenue growth and our overall margin. We expect the sale of these businesses to result in an additional $500 million in proceeds within the next 12 months.”
DXC’s annual revenue was roughly $17.73 billion for fiscal year 2021. So the potential $500 million asset sale represents only about about 3 percent of the company’s annual revenue. Salvino did not describe which specific pieces of DXC’s business portfolio are up for sale, nor did he mention potential suitors for the assets.
DXC: Previous Asset Sales
DXC is no stranger to asset sales. Earlier moves include selling off: Indeed, DXC Technology has sold off these businesses since 2020:
- December 2021: An IT services arm in Israel to Ness for $65 million.
- January 2021: Managed trading service provider called Fixnetix to Options Trading.
- July 2020: Healthcare software to privately held Dedalus Group for $525 million in cash.
- March 2020: U.S. State and Local Health and Human Services Business to Veritas Capital for $5.0 billion.
DXC Pursues Organic Growth Rather Than Acquisitions
Meanwhile, DXC is focused on building a strong foundation “and we still have work to do,” CEO Salvino. Rather than make acquisitions, the best use for cash over the next 12 months is to return it to shareholders, he asserted. Still, Salvino left the M&A door slightly ajar just in case the right deal comes along. “We never say never,” he noted.
The overall DXC business remains in turnaround mode. Revenues were $4.09 billion for Q3 FY22, down 4.6% compared to the corresponding quarter last year.
Among the key growth opportunities: A Platform X push, aligned with ServiceNow, to ensure DXC can detect, prevent and address issues before they impact customers’ cloud and on-premises IT systems, Salvino asserted.
Still, DXC faces intense competition in the market for ServiceNow-related platforms and IT services. To wit: ServiceNow is a top five technology partner for each of the world’s top 10 global IT consulting businesses, ServiceNow CEO Bill McDermott said in a January 2022 earnings call.