Headlines:
CSC Downgraded; Buyout Talks Said Off
Analysts at two firms downgraded Computer Sciences Corp.'s stock Monday after reports that the El Segundo, Calif., technology services company had failed to reach a buyout deal.
However, there is still speculation that CSC may be willing to spin off its banking unit, which sells the Hogan Integrated Deposit System for core processing.
"Management seems ready to accept the right offer," Edward S. Caso Jr. of Wachovia Securities wrote in a note to clients.
Both Wachovia and Legg Mason Inc. lowered their ratings to "hold," from "buy."
The Wall Street Journal reported Saturday that CSC had ended discussions with a group of private equity firms without a deal. Last month the Journal reported that the company was considering selling itself to the group, and that the defense contractor Lockheed Martin Corp. might be a strategic investor.
Neither CSC nor Lockheed has ever acknowledged that any negotiations have taken place. A CSC spokesman did not return a call Monday seeking comment.
Lockheed reportedly was interested in acquiring CSC's government contracting business but insisted that the private investors take the remainder of the company. CSC reportedly rejected that term.
The government business generates about a third of the company's revenue and nearly half its operating earnings.
Bill Bradway, the group vice president of retail financial services at Financial Insights Inc., said the deal's structure would have been too risky for CSC's managers.
He noted that CSC is continuing to work with Fidelity National Information Services Inc., which is majority owned by Fidelity National Financial Inc. of Jacksonville, Fla., to provide an outsourced version of the Hogan system.
Hogan is used in-house at 10 of the nation's 25 largest banking companies, including Wells Fargo & Co., U.S. Bancorp, and Washington Mutual Inc., but has never been offered as an outsourced service. CSC and Fidelity announced in September that they were working to provide such a service.
"If CSC does decide to partition off the bank portfolio, Fidelity would know the most about it and would be in a position to leverage it," Mr. Bradway said.
A Fidelity National spokeswoman did not return a call requesting comment.
Slow Teller Upgrade at Mo.'s Commerce
Commerce Bancshares Inc. of Kansas City, Mo., is upgrading its aging teller system but has decided to put off installing scanners to convert checks into images.
Charles G. Kim, the $13.9 billion-asset Commerce's executive vice president of retail banking, said the cost of the imaging equipment would not be justified except in a few of the company's most remote locations. However, Commerce has not ruled out imaging technology altogether.
"We designed the system with the ability to do that in a second or third phase," Mr. Kim said last week at a presentation at the Bank Administration Institute's Retail Delivery conference in Orlando.
Commerce, which has been using internally developed branch software for six years, is about midway through its rollout of the Globalfs browser-based teller system from the Dutch vendor Getronics NV.
The project is taking longer than expected. When Getronics announced the project in October 2003, Mr. Kim said he expected it to be done by early 2005.
Commerce has 327 branches in Missouri, Illinois, and Kansas, but last year it earned 89% of its profits in five markets, Mr. Kim said; about 60% of its profits came from Kansas City and St. Louis.
About 80% of its customers visit a branch at least once a month, but branch traffic is on the decline, he said. "As we do fewer transactions in the branch, we need a better tool, a more robust tool, to have a richer customer experience. We can't afford to let that delivery system languish without reinvesting."
For example, tellers had no computers at their workstations, so they had no access to company e-mail, Mr. Kim said. Tellers are "our largest employee population, and they didn't have the normal communications tools." The upgrade will remedy that problem.
In addition, without online access to the core deposit-accounting system, tellers could not give a customer account-balance information without leaving the workstation, and the information did not always match what a customer got from an automated teller machine or the Web site, Mr. Kim said. "We were confusing our customers."
