CSC Disputes Contract Termination

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Computer Sciences Corp. on Monday challenged Sears Holdings Corp.’s termination of its 10-year, $1.6 billion technology services contract.


On Friday, Sears said Computer Sciences failed to meet certain obligations in the contract, charges the El Segundo-based company disputed in a Securities and Exchange Commission filing. CSC says the claim of the Sears Roebuck and Co. unit is invalid and damages will be sought. Sears “contrived to avoid or reduce termination fees of tens of millions of dollars” and breached its contract, Computer Sciences said.


Computer Sciences maintains that it performed all of the services required in the contract. The company provided Sears with services that included desktops, servers and systems that supported Sears-related Web sites. Sears did not reveal what services it believes were lacking.


A federal judge denied Computer Sciences’ suit to stop Sears from ending the contract for cause, Sears said in its filing. And in a pending arbitration proceeding, Computer Sciences sought an emergency hearing to stop Sears from terminating the agreement, which was denied, Sears said.


Computer Sciences invested in hardware and software for the contract and will take an unspecified charge if efforts to recover the investments aren’t successful. Sears said it does not expect to pay any termination fees because it exited the deal “for cause.”


Sears said last year that outsourcing its computer systems to Computer Sciences would save it about $40 million a year, and that as many as 200 workers would join the company, Bloomberg News reported. It also sold about $19 million in equipment to Computer Sciences.


Shares of Computer Sciences closed down 0.7 percent to $43.33 on Monday.

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