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DXC Technology linked with private equity takeover talks

The cloud has forever changed infrastructure services landscape – just ask IBM, HPE, CSC and Atos

IT services biz DXC Technology has pulled in consultants to help senior management examine a takeover bid.

Or so claims Bloomberg, which quoted loquacious sources close to the matter that naturally asked to remain anonymous. At least one private equity suitor is understood to be in the frame, and word of the interest caused DXC's share price to spike more than 9 percent.

DXC has refused to comment.

This isn't the first time DXC was involved in takeover talks after Atos, another shapeshifting infrastructure services provider, approached its US-based rival in January 2021 to join forces. This was classified by Atos as a “potential friendly transaction” but it didn’t ultimately happen.

At the time, DXC branded the offer, believed to be in the region of $10 billion, as “inadequate and lacking certainty in light of the value the board believes DXC can create on a standalone basis by executing our transformation journey.”

DXC was forged in the fires of a merger between two struggling businesses, CSC and HPE Enterprise Services, they came together in 2017 to boost economies of scale in a part of the tech industry that was being decimated by the cloud as enterprises took another look at the way they consume technology.

The approach taken by the early management team at DXC was to cut costs faster than revenues ran off; this involved real estate consolidation, including datacenter space, and unrelenting redundancy rounds for staff on the infrastructure services side. Morale internally slumped among some employees.

A new exec team led by Mike Salvino came on board in 2019 and is still trying to turn the ship around.

Revenue of $24.55 billion in fiscal 2018 had fallen to $16.26bn in fiscal 2022 and the company has reported both reasonable profits and steep losses in those years.

DXC isn’t alone in the challenges it faces: IBM’s Global Technology Services division suffered a similar fate in recent times and decided to spin out the business into a separately traded entity, Kyndryl. Now infrastructure services no longer weigh down Big Blue’s revenue growth. And Atos is this year going through the same process, spitting out its faster growing and declining businesses into two separate organizations. ®

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