How Computer Sciences Corporation Gained 11% in September

By Markets

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What happened

Shares of Computer Sciences Corporation (NYSE: CSC) rose 11% in September 2016, according to data from S&P Global Market Intelligence. The surge started with a glowing review from a business analyst firm and was reinforced by a new storage partnership with tech giant Hitachi (NASDAQOTH: HTHIY).

So what

In the 2016 edition of Gartner's "magic quadrant" overview of North American data center outsourcing services, CSC landed in the top-right corner for the sixth year in a row. The "leader" classification was followed by the industry's top grade for "completeness of vision" in Gartner's view. The analysts were impressed by CSC's hybrid cloud solutions and general level of innovation.

Thanks to the "magic quadrant" announcement, CSC shares closed 5% higher on Sept. 15.

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One week later, the Hitachi collaboration boosted CSC's stock by another 4% overnight. Building on the hybrid cloud platform that Gartner liked so much, the combination of Hitachi Unified Computing Platform and CSC BizCloud tools was seen as a significant step forward. The partnership also includes a multiyear reseller agreement, giving CSC some access to Hitachi's massive sales and marketing networks.

Now what

CSC has been an active deal maker in recent months. Knee-deep in a pending merger with the enterprise services division of Hewlett-Packard Enterprise (NYSE: HPE), the stock surged 48% higher in May thanks to the HP deal. On the other hand, CSC spun out its own division of federal government services last year, creating CSRA (NYSE: CSRA) in the process.

Since the separation, CSC shares have gained a grand total of 64% while CSRA investors have seen their shares fall 16% lower. The pure play on enterprise IT tools and consulting services seems to be working out pretty well.

Next up, CSC is due to report second-quarter results in early November. Beyond that, the HP deal is expected to close in March 2017. That's a game changer, and CSC will be a very different company at that point.

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Anders Bylund has no position in any stocks mentioned. The Motley Fool owns shares of and recommends IT. Try any of our Foolish newsletter services free for 30 days.

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