Completely. Is there any basis for this rumor (heard it in the office). I do not know much about them.
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Takeovers after share price declines actually does happen - look at what happened to Pivotal software this week. The market has been very excessively punishing revenue decliners and at 4 times forward earnings, a lot of that hard work in restructuring can seem a lot less expensive.
Makes sense to move DXC operations to India as there are many unemployed and unskilled IT people there. Maybe this is the fire sale that ML has been aiming for all the time?
Good Q - would see HCL waiting more and more for DXC share price to fall, revenue to fall before ML is in a panic to sell the company off and get rid + retire on his millions.... However taking over a toxic brand by HCL is problematic for them, they would have to console the business - gaining knowledge + customers and chopping out excessive staff - mainly from the DXC staff coming over.
The losers of this acquistion likely to be the cheap offshore centres of India, etc where HCL already has a large presence and the headcount in USA, Europe before any likely takeover / sale to HCL likely to be minimal (due to excessive WFR since formation and more planned going forward)
Heard DXC will keep "Digital" and sell off the rest to HCL. WFRs have been accelerating recently - most with a 6/28 (end of financial quarter) termination date. That date corresponds with the closing date of the former EDS headquarters campus in Plano, Texas.
We already know the answer. DXC shares have halved recently. This sort of thing never happens before a takeover.
So, now that we know the takeover deal is off the table, Mike L has no other choice but to chase turnover decline with cost cutting. Everyone knows it.
ML has no other choice but to throw baby out with the bath water. there is no other way to keep DXC "profitable" because the downward turnover curve is accelerating as Traditional DXC customers walk away simply because of due diligence concerns regarding capability and service levels.
The 3 year time frame of cuts was always about the share price - giving ML time to secure a sale. - ML has failed to get a good price this time.
Just have to wait until DXC becomes small enough for another takeover to be done
I think it unlikely that a single entity would want to consume all of DXC.
Thats not actually the trend that you see anywhere right now.
In fact the ES acquisition is actually the oddity in the business world. The norm is for specific verticals (eg Federal Government) or types of IT (eg Cyber) to be split or acquired, ES was a broad spectrum IT services element.
I don't think you'll see anyone wanting to repeat that exercise any time soon - especially when you look at the mess DXC made of it. The cost of wholesale purchase and then "restructuring" (aka terminating contracts with both clients and employees) is massive. Picking the bones out of something large is expensive.
One thing that you can actually agree with Mikey on is that the market for old skool ITO is declining. I say declining and not being totally eliminated though.
I think sooner or later what we will see is someone somewhere decide to go the MicroFocus route - to become a specialist pure play legacy ITO company and sweat those customers who for whatever reason do not or cannot embrace the cloud - and there will always be some of those.
It might make business sense to set that as your target and then acquire all of the "junk" legacy ITO from all of the big IT service providers.
Mark my words, someone sooner or later will chose this route.
In the meantime, yes, I could expect more bits of DXC to be sliced off if possible. At the moment though even if you could identify a suitable removable piece, what value does it have? Upset customers, disrupted service delivery, lack of tribal knowledge due to staff leaving or being WFR'ed. What exactly would anyone be buying? You'd be lucky to give it away and most likely DXC would have to pay someone to take it away. Which actually isn't as uncommon as you might think - it is a way of stemming a haemorrhage in your business.
Who knows?
HCL based in Noida is India's 4th largest software exporter and has roughly the same employee headcount as DXC. Like DXC, HCL relies heavily on partnerships and acquisitions to generate its growth. It entered into a JV with DXC back in 2015 (FinTech Services) to produce banking products was later turned into an IP (strategic) partnership in 2017 where HCL became responsible for development and delivery of banking products but retain inclusive rights for the banking products for 10 yrs.
Although HCL has a similar staff size to DXC it appears more effective at delivery and growth: despite HCL's revenue and total assets being less than half of DXC's, its net income is still an impressive $1.4B (and rising) compared to DXC's $1.2B (declining) due to its much lower cost base efficient processes and being able to make the best of its partnerships.
Gartner peer insights gives HCL a much higher vendor rating of 94% compared to DXC's 38% and its Glassdoor employee satisfaction is also higher with 67% willing to recommend it to a friend with 83% supporting HCL's CEO, compared to DXC's 38% and only 36% who would recommend DXC to a friend.
HCL certainly has much better press and PR than DXC with some impressive wins and partnerships and only this month became Cricket Australia's digital technology partner to support the organisations platforms and live apps.
HCL doesn't have enough capital on its own to mount any bid for DXC and would need some IBM help. Though it would likely be a huge gamble for anyone to try and take on DXC given all its internal problems, churn, high cost-base, inefficient processes, turnstile operating model and fluctuating stock price.
However, we all love rumours and perhaps the DXC's financial insurance services and banking side could be 'polished' up a bit and made attractive to HCL to buy out the other 50%. The stock is low and not showing consistent climb at the moment which DXC continues to believe is undervalued so the timing might not be right at the moment.
This is Mikey's plan all along - maybe not HCL but he will certainly sell to someone similar.