CSC Stock Falls on Talk of Waning Demand

Computer Sciences Corp.’s shares dropped 16% after an analyst issued a report warning that demand may be waning for its information-technology services such as management consulting and data processing. Lehman Bros. analyst Karl Keirstead cut his rating on the stock to an “outperform” from “buy” in his report that declared “the overall IT services industry is clearly experiencing a demand slowdown.”

Stephen McClellan of Merrill Lynch said he disagrees with Keirstead, noting that El Segundo-based CSC is considered the lead contender for contracts with Raytheon Co. and San Diego County, each worth more than $1 billion.

At the same time, smaller rivals have been showing signs of trouble. Analysts have cut estimates for 26 of the 39 publicly traded IT services firms in the last month, and eight of those have warned that profits would be lower than expected.

Although large firms such as CSC and No. 2 Electronic Data Systems Corp. haven’t been hurt by the slowdown, Keirstead says he sees signs that’s changing.

CSC fell $8.19 to close at $60.56 on the New York Stock Exchange. Keirstead’s concerns also hurt EDS. It fell $1.19 to close at $50.63, also on the NYSE.