DXC Technology Faces 12% Share Drop as CEO Steps Down

DXC Technology (NYSE: DXC) has experienced a substantial 12% decline in its stock value today, in the wake of the announcement of Mike Salvino’s resignation from his positions as Chairman, President, and CEO, effective immediately. Consequently, Raul Fernandez has been appointed as the Interim President and CEO as the company initiates a search for a permanent replacement, considering both internal and external candidates. Additionally, David Herzog, the Lead Independent Director, will assume the role of Chairman.

According to Citi analysts, Salvino’s departure – characterized as a termination without cause – does not seem to stem from any underlying issues or concerns. They speculated that dissatisfaction with the pace of returning to growth may have influenced this decision.

“The fiscal 3Q24 outlook was affirmed, but only the FY24 FCF outlook was confirmed, likely causing investor concerns about the potential for FY24 revenue, margin, and EPS outlooks to be revised downward. We believe this introduces further uncertainty to the gradually evolving DXC story,” stated analysts at Citi, reiterating their Neutral rating and a price target of $24.

Conversely, analysts at Wolfe Research offered a slightly different perspective, suggesting that while the change in leadership introduces uncertainty, it could ultimately be viewed as a positive step as DXC repositions itself for long-term growth. They highlighted that Salvino’s strategies, such as efforts to limit declines in the Global Infrastructure Services (GIS) segment and potential asset sales, did not fully come to fruition. They also noted that the company’s valuations of certain declining businesses might have been higher than market perceptions.

“Additionally, guidance visibility came into question during his tenure. Since Salvino was appointed in September 2019, the company has lowered guidance and missed consensus expectations several times, albeit we recognize worsening macro headwinds limiting visibility,” added the analysts at Wolfe, reiterating their Underperform rating with a $22 price target.

While the news of Salvino’s departure has led to a significant stock drop for DXC Technology, the company’s next moves during this leadership transition and the subsequent changes aimed at driving future growth remain to be seen. Investors are advised to closely monitor the developments as the company searches for a new CEO to steer the organization in a new direction.