CSC Profit Up 20% on Rising Defense Demand

Computer Sciences Corp., the No. 3 U.S. seller of computer services, said Tuesday that profit in its fiscal first quarter rose 20% on rising demand from the Defense Department and European customers.

Net income in the three months ended July 2 increased to $110.4 million, or 58 cents a share, from $92.3 million, or 49 cents, a year earlier. Sales rose 5.1% to $3.74 billion from $3.55 billion.

Analysts surveyed by Thomson First Call expected the company to report profit of 57 cents a share and sales of $3.76 billion.

El Segundo-based CSC said it expected sales to rise as much as 9% this quarter amid higher spending on the U.S. war on terrorism, which has cost about $114 billion over three years.

Chief Executive Van Honeycutt said on a conference call that there’s “soft demand” outside the U.S. for consulting and other services such as combining and installing computer systems.

CSC shares fell as much as $3.08, or 7%, to $41.12 in extended trading after the results were released. They had climbed 56 cents to $44.20 in regular trading on the New York Stock Exchange.

CSC said that sales would rise 7% to 9% this quarter, which ends Oct. 1, and that it was comfortable with analysts’ expectations for profit of 63 cents to 68 cents a share. The company had been expected this quarter to earn 67 cents, the average estimate of analysts in a Thomson First Call survey.

Full-year profit will be $3.10 to $3.20 a share, CSC said, reiterating a forecast made in May.

Computer Sciences won $4.9 billion of contracts in its first quarter, compared with $4.3 billion a year earlier. Customers included the Defense Department and Royal Mail Group of Britain.

Sales were lifted by last year’s $950-million acquisition of DynCorp Inc., which handles security and police training in Iraq and lists the Defense and State departments and the Federal Bureau of Investigation among its customers.

Excluding currency fluctuations, first-quarter sales rose 2.5%.