Dodge: Who are those guys?

The association by extension with Computer Sciences Corp. didn't help my clouded recollection of what the company does. Defense industry and government systems consulting, I think. It's related to all those aerospace companies that used to dot the Southern California landscape. Hmm, who are those guys?

My fuzzy image, calibrated by CSC's Web site, was not far off the mark. The company was founded as a computer consultancy in 1958 by two aircraft company executives, both long since deceased. My wife worked for a small CSC subsidiary in Cambridge, Mass., called Index Systems, which does re-engineering and consulting.

	CA's $9B bid: An offer they can't refuse? for CSC.
	Dear CSC: The text of CA's offer letter.
	CA: Why we want CSC
	What CSC offers back
	Dodge: Hmmm, who are those guys?

Yes, expertise in the enterprise computing field is worth 10 times its weight in gold. It's akin to someone dying and bequeathing deep customer relationships to the survivor. Such accounts or assets, continuing with the inheritance metaphor, are unattainable unless they are willed to you. Or you buy them outright.

What does CA get for $9 billion? That's slightly more than what Compaq is paying for Digital, which has more than twice the revenues of CSC. (Of course, I've had more time to figure out Digital's integration into Compaq, and it makes more sense every day.)

The first thing you notice is that CSC's client list is heavily tilted toward the federal government. On its list of "client engagements," there is one government account for every commercial account-Merrill Lynch, CP Rail and First Chicago are followed by the Bureau of Land Management, NASA and the Department of Defense. Remember, President Bill is balancing the budget and that can only mean fewer fed bucks ahead.

Then again, consulting and services-CSC breaks down into management consulting, outsourcing and systems integration-are a high-margin, sought-after business these days. And CSC says it has $9.5 billion in firm future contracts, the majority of which are with large commercial customers.

Companies will pay dearly not only for services, but simple entree into corporate accounts. One wonders what other deals lie immediately ahead in this instant reshaping of the enterprise computing landscape. Does this force Hewlett-Packard's hand? What could EDS, Perot Systems or Cambridge Technology Partners fetch on the open market?

Back to CA's takeover of CSC.

The chances of a hostile takeover succeeding are always lower when people are the primary assets in the acquired organization. IBM's key concern when it bought Lotus was the loss of key employees. For sure, some left, but none were so critical that the success of the takeover was threatened. Smartly, IBM chose a hands-off approach, chose the right set of new leaders and sweated out the rest. Today, the acquisition of Lotus stands as a model of how to acquire a large software company.

CA's style is different. It usually keeps engineers and "knowledge talent," but sheds marketing personnel and overhead. CA also absorbs the acquired brand and products into its own extensive stable of products-a different approach from that of IBM's with Lotus or Tivoli.

Maybe it will be different this time. It can be done. And maybe it's only the first shot in what could be a protracted takeover battle. CA is paying $16 a share more than the CSC trading price at close of market yesterday.

This environment invites an open checkbook. There will be many more obscure companies gobbled up before the final chapter of this saga is written.