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DXC Completes Healthcare Software Unit Sale to Dedalus Group

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DXC Technology DXC announced last week that it has completed the proposed sale of healthcare software provider business unit to Dedalus Group. Notably, the two companies had announced the transaction in July 2020.

DXC’s innovative healthcare software give clinicians and caregivers the tools they need to improve processes across the continuum of care. The company’s technology solutions provide tools to healthcare providers to better connect with their patients, which helps them boost productivity and patient outcomes.

The divestment can be seen as part of DXC’s strategy to offload non-core assets. Notably, the IT and consulting services provider announced in November 2019 that it is exploring options to divest three of its non-core businesses, including the State and Local HHS business, the horizontal BPS business and the workplace and mobility business. The three units account for about 25% of DXC’s total revenues, on a combined basis.

In this regard, the company completed the sale of its State and Local HHS business to the private equity firm Veritas Capital for a total consideration of $5 billion last October. The sale of the healthcare software provider business unit is anticipated to generate net proceeds of about $450 million to DXC.

DXC Technology Company. Price

DXC Technology Company. Price
DXC Technology Company. Price

DXC Technology Company. price | DXC Technology Company. Quote

Asset Divestments to Help DXC Reduce Debt

DXC was formed in 2017 by the merger of Computer Sciences Corp. and the enterprise services unit of Hewlett Packard Enterprise HPE. CSC, prior to the completion of the merger, had taken additional debt. This has amplified DXC’s total long-term liability, thereby, increasing its interest-cost burden.

As of Dec 31, 2020, DXC’s balance sheet had only $3.92 billion in cash and cash equivalents, while long-term debt outstanding (net of current maturities) was $5.44 billion.

By spinning off certain assets from time to time, the company aims to pay off its debt in parts. Remarkably, during third-quarter fiscal 2021, it reduced its long-term debt outstanding by $2.61 billion.

Focus on Core Businesses

Spinning off non-core assets improves DXC’s focus on its core businesses. Also, it enhances the firm’s ability to execute acquisitions strategies across high-growth businesses, including enterprise software-as-a-service, technology security solutions, and autonomous driving.

In August 2019, the company acquired independent service management and security solutions provider — Syscom. The acquisition of the leading ServiceNow NOW partner is helping DXC strengthen its position as a leading ServiceNow solutions provider across the Nordics region.

Furthermore, in April 2020, the company’s digital strategy and software engineering arm, Luxoft, completed the acquisition of mobility systems developer, CMORE Automotive. This acquisition will help DXC Technology enhance its capabilities in the Autonomous Drive/Advanced Driver Assistance Systems (AD/ADAS) space.

Zacks Rank & Key Pick

DXC currently carries a Zacks Rank #3 (Hold).

A better-ranked stock in the broader technology sector is Dropbox DBX, carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The long-term earnings growth rate for Dropbox is currently pegged at 40.9%.

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