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DXC Franken-firm 'on track' to slash $1bn with deeper 'synergies' ahead

Meaning redundancies, cutting travel budgets and shedding 1.2 million square feet

By Kat Hall, 9 Aug 2017

DXC, the Franken-firm made up of CSC and the enterprise services arm of HPE, is "on track" to slash spending by $1bn (£760m) this year – with plans to further ramp up the cost-cutting throughout the year.

Under its "synergy plan" the biz shaved off $140m for the first quarter, according to the outfit's maiden financial results.

It achieved that by "removing four management layers", shedding 1.2 million square feet of its real estate, making "significant reductions" in professional services and travel expenses, and "rapidly consolidating redundant roles".

Just six weeks after launching in April, DXC sought to cut costs by seeking voluntary exits "as our preferred means to manage the workforce in the UK".

Insiders have told El Reg the business hopes to lighten its payroll by slashing hundreds more jobs in Blighty.

Mike Lawrie, chief exec, said: "We achieved several key merger integration milestones and are executing on our synergy plan.

"We have implemented the first phase of the plan and are on track to meet our targets of $1bn of year-one cost savings in fiscal 2018 as well as $1.5bn of run-rate cost savings exiting the year."

The biz said it aims to turnover $24bn for the full year 2018.

On a conference call, DXC veep Paul Saleh said the outfit will be ramping up its "synergies", with a target of around $250m for the next quarter.

"We're looking at converting some of our external labor where it makes sense particularly in certain skill sets and particularly in certain geography," he said.

"At the same time we're continuing to use automation as an opportunity to just really drive greater efficiencies in our labor force."

The combined businesses included certain pro forma financial information that combines the standalone CSC and Enterprise Services financial information as if the merger had taken place on April 2, 2016.

Revenue in the first quarter was $5.913bn, down 4.2 per cent year-on-year.

Global Business Services revenue fell 3.8 per cent to $2.42bn and Global Infrastructure Services dropped 4.7 per cent to $3.29bn.

Kate Hanaghan, analyst at TechMarketView, noted the revenue decline in GBS was driven by the completion of large app services contracts in UK government, which countered growth the business had seen in next-gen offerings around cloud, consulting and analytics.

"It's a familiar tale in many of the large SI firms, and one that we believe has some time to run. The story is similar in GIS where a 'tapering decline in traditional infrastructure services' hit the top line."

Public sector revenue was hit by the completion of a large phase of DXC's NHS contract in July 2016, while US government business also declined 3.5 per cent. ®

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