Comdisco Accelerates Strategic Focus On High-Growth Businesses
ROSEMONT, Ill.--(BUSINESS WIRE)--March 24, 1999--
Divestiture of Low-Margin Businesses and $150 Million Pre-tax Charge
Enables Company to Expand Global Service Businesses
Comdisco, Inc. (NYSE:CDO), a leading technology services company, today announced a major shift in corporate strategy designed to accelerate its growth as a global provider of technology infrastructure solutions.
To address increasing market demand for technology services, the company is moving to focus on high-margin service businesses and shed low-margin businesses, including its mainframe leasing portfolio and vendor lease portfolio. It also plans to speed up the introduction of new service offerings in high-growth areas and increase investment in building the Comdisco brand as a leader in the information technology marketplace.
"Throughout Comdisco's history, we have reinvented the company to address emerging market trends. Now, as businesses rely increasingly on their technology infrastructure to increase profits and hold down costs, Comdisco is focusing where our customers need us most: on strengthening and expanding our industry-leading global technology infrastructure services," said Nicholas K. Pontikes, president and chief executive officer. "Our fast-growing technology service businesses currently have a backlog of more than $1 billion in contracts. This growth area represents the future of Comdisco. By building on the strong Comdisco brand, investing in higher growth, high return initiatives, selling under-performing assets, and reducing risk in our remaining IT lease businesses, we will deliver enhanced value for our shareholders."
The company also said it has completed the acquisition of Prism Communication Services, Inc., a New York City-based provider of high-speed communications services. Comdisco had previously announced an equity investment in Prism, formerly Transwire Communications. Responding to the business demand for innovative, low-cost communications services, Comdisco and Prism are developing leading-edge managed network services for voice and data networks.
Comdisco has realigned to focus on technology services, which include continuity, network, lifecycle management services, and Prism. It is also focused on its global leasing business in high-margin areas such as electronics, communications, medical, lab & scientific, and ventures businesses.
In conjunction with the repositioning, Comdisco said it would record a one-time pretax charge of $150 million, $96 million after tax, or approximately $0.60 per diluted share. The charge will be recorded in the second quarter ending March 31, 1999. Components of the charge include:
1. $100 million pretax associated with the company's plans to exit
the mainframe residual leasing business. The company said it
anticipates closing the sale of the mainframe portfolio to a
third party, subject to the execution of a definitive agreement
and regulatory approval, during its third fiscal quarter, ending
June 30, 1999.
2. $20 million pretax associated with plans to exit the medical
refurbishing business. The company is currently negotiating with
a third party for the sale of the business and anticipates
closing the sale in its third fiscal quarter.
3. $30 million pretax associated with the realignment of Comdisco's
service businesses, including costs associated with the
relocation of its network management centers and previously
announced consolidation and reconfiguration of some of its
continuity services facilities worldwide.
"Our customers are continuing to search for help in evaluating, upgrading, and supporting their critical technology infrastructure. With these important moves, we will build on our base of existing service businesses to provide the solutions our customers want and need in the changing technology arena," said Pontikes.
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