(Reuters) – Shares of DXC Technology fell 18% on Friday after the IT services provider unveiled a new revamp and forecast fiscal 2025 revenue and profit below estimates.
The latest attempt comes after a sale bid failed last year and the departure of top executives and a slowdown due to high interest rates hampered efforts to transition the declining traditional business of IT outsourcing services to cloud-based solutions.
“DXC has been in transition for several years and despite the efforts of multiple leaders, one must ask whether this company can be resolved,” RBC Capital Markets analysts wrote in a client note.
“The new management is once again restructuring to streamline the business, suggesting that FY25 will be another year of transition.”
The latest restructuring will cost another $250 million in fiscal 2025 and is aimed at reducing overcapacity in existing operations, Chief Financial Officer Robert Del Bene said in a post-earnings call.
Bene took on the role after Ken Sharp left in September. In December, Raul Fernandez took over as CEO after Mike Salvino resigned.
The restructuring will also weigh on DXC’s free cash flow, with the company expecting around $400 million for fiscal 2025, well below the $756 million it reported in FY24.
“Equities’ tolerance for yet another restructuring that eats up near-term free cash flow and interrupts share buybacks in FY25 is likely low,” JPMorgan analysts said.
Shares of DXC, which announced a $1 billion buyback in May 2023, have lost 13% of their value so far in 2024 after crashing a combined 30% over the past two years.
It was on track to lose more than $635 million in market value on Friday.
At least nine of the 14 analysts covering the stock have lowered their price targets, according to LSEG data.
(Reporting by Harshita Mary Varghese; Editing by Shilpi Majumdar and Sriraj Kalluvila)
