ACS adds MIPS to CDSI's business

Computer Data Systems Inc.'s pending merger with Affiliated Computer Services Inc. would dramatically increase the data center resources that the Rockville Md. company could bring to bear in the federal market.

CDSI last Sunday announced that it agreed to be acquired by ACS a Dallas company engaged primarily in data center outsourcing in the commercial sector. The transaction valued at about $373 million is expected to close during the fourth calendar quarter. CDSI had revenue of $304.4 million for the fiscal year ended June 30. ACS had revenue of more than $600 million during the same period.

John C. Kezer CDSI's treasurer said ACS has "done a lot of data center outsourcing" and offers "significant capacity." ACS operates five data centers providing more than 4 000 millions of instructions per second of mainframe processing and more than 3 200 MIPS at the midrange level. CDSI has one data center with 80 mainframe MIPS. The company generates 40 percent of its business from processing services according to the company. CDSI's multimillion-dollar pact with the Education Department's Direct Student Loan Program is among the company's data processing jobs.

Kezer said pressure on federal budgets could produce an outsourcing opportunity for the companies in the federal sector. The merger "could open up a new market to [ACS] " Kezer said.

ACS' interest in the federal market has increased in recent months. The company for example is a subcontractor to Unisys Corp. on the General Services Administration's $6 billion Virtual Data Center Services pact which was awarded in February. The company also was among the companies listed as potential bidders on the Federal Aviation Administration's Integrated Computing Environment-Mainframe and Networking or ICEMAN which eventually was awarded to the Agriculture Department.

ACS has been growing through a combination of acquisitions and large outsourcing contracts said Susan Scrupski editor of the IT Services Letter a publication that covers the outsourcing market. She cited ACS' outsourcing pact with APL Ltd. formerly American President Companies Ltd. as a recent deal. ACS officials could not be reached for comment.

The pending purchase is a reversal of roles for CDSI which earlier this year acquired Analytical Systems Engineering Corp. for $51 million. ASEC provides systems engineering technical and program management services to the Defense and intelligence communities [FCW June 2].

CDSI will operate as a subsidiary of ACS. Peter Bracken the former Lockheed Martin Corp. executive hired as president and chief executive officer by CDSI in 1996 will run the subsidiary. Clifford M. Kendall chairman of CDSI will join ACS' board as will Bracken.

* * * * *At a GlanceCompany: CDSI

Founded: 1968

Headquarters: Rockville Md.

Offices: 31

Fiscal 1997 revenue: $304.4 million

Contract vehicles:

* GSA ADP services schedule

* DOT Information Technology Omnibus Procurement Systems and Facilities Management

* Army Umbrella 3 (sub to SRA International)

* DOD Defense Enterprise Integration Services II (sub to BDM)

* NIH Chief Information Officers Solutions and Partners (sub to SRA)

* DOJ Information Technology Support Services (sub to BDM)

* Navy Information Technology Support Services

* USDA Farm Service Agency II (sub to IBM)