DXC Technology is on track to close its planned purchase of Luxoft by the end of June, according to Mike Lawrie, DXC CEO and president.
Luxoft’s digital talent acquisition capabilities stand to “accelerate DXC’s ability to capitalize on digital demand from our clients,” he said Feb. 7 during an earnings call for DXC’s third quarter (ended Dec. 31).
The purchase will also “create significant value through revenue synergies and access to a broader pool of digital talent,” he said, telling analysts: “Luxoft strengthens DXC’s portfolio of digital offerings with proven capabilities in high-growth areas, including analytics and business intelligence, user experience,” the Internet of Things (IoT) and blockchain.
Luxoft also has a “very strong outsourced engineering business,” he said, noting Luxoft has a “highly skilled digital workforce of more than 13,000 people,” with more than 80% of that workforce having a master’s degree or Ph.D.
DXC estimates it will see $200 million to $400 million in incremental revenue from the combined company by fiscal year 2022, he told analysts, adding: “We believe there’s an opportunity to expand wallet share with each company’s respective clients. Further, we’ll be able to expand Luxoft’s existing platforms into additional geographies and industries.”
DXC was “very pleased with the Luxoft transaction — we think it’s a quality acquisition at a fair price and I think there’ll be things that we’ll be able to add on to that platform as we go forward,” he said.
DXC announced Jan. 7 that it planned to buy fellow Media & Entertainment Services Alliance (MESA) member Luxoft for about $2 billion.
As part of DXC’s continued strategic investment efforts in digital assets and capabilities, it also recently announced a plan to acquire the services division of EG A/S, one of the leading integrators of Microsoft Dynamics 365 in Northern Europe, he pointed out. Terms of that deal weren’t disclosed.
DXC also acquired argodesign, an Austin, Texas-based digital design consultancy, in the fall, and that company “will enhance DXC’s capabilities in interface design and user experience, which are key elements in developing and delivering digital transformation solutions at-scale,” he said.
Since the end of October, DXC has hired more than 1,000 digital employees, Lawrie also said on the call. As previously discussed, DXC “centralized digital hiring efforts with a strong focus on our digital transformation centers,” he noted, adding those roles include Amazon Web Services (AWS) and Microsoft Azure architects, data scientists and DevOps engineers.
“We’ve also identified an additional 2,000 current DXC employees to be re-skilled in digital technologies,” he said, adding the company is “rapidly correcting the hiring delays that we discussed in the second quarter and will continue to accelerate hiring and training efforts in support of our fastest-growing capabilities.” In addition, he said, “over the next couple of months, I’d like to hire another couple thousand people in digital.”
Asked during the Q&A about possible future acquisitions and divestitures, he said: “We’re always looking for ways to enhance shareholder value…. We have all options on the table all the time. Candidly, I don’t see a lot of divestitures as I look out because we have really remixed the portfolio quite dramatically over the last couple of years. I do think we’ll see some more smaller tuck-in type acquisitions, particularly in the digital space.”
Once the Luxoft purchase is completed, “there’s a whole series of smaller opportunities that can be added to that business model,” he said, adding: “We continue to look for areas, where we can strengthen our IP portfolio, like we did with Molina in healthcare. We’re continuing to look at other practices to strengthen our really very strong position in Microsoft Dynamics 365, as well as ServiceNow, where we’ve made significant investments.”