DXC Technology (NYSE:DXC) faced a sharp 12% drop in its share price today following the announcement that Mike Salvino is stepping down as Chairman, President, and CEO, effective immediately. The company's board member, Raul Fernandez, has been appointed as the Interim President and CEO, with a search underway for a permanent replacement, considering both internal and external candidates. Meanwhile, David Herzog, the Lead Independent Director, will assume the role of Chairman.
Analysts at Citi commented on the situation and highlighted that Salvino's departure, classified as a termination without cause, doesn't seem to stem from any underlying issues or concerns. They suggested that some dissatisfaction with the pace of returning to growth could be a factor.
“The fiscal 3Q24 outlook was affirmed as well, but only the FY24 FCF outlook was confirmed, likely leading to investor concerns on the potential for FY24 revenue, margin, and EPS outlooks to be lowered. We believe this adds another uncertainty to a slowly developing DXC story,” analysts at Citi, reiterating its Neutral rating and a price target of $24.
Analysts at Wolfe Research offered a slightly different perspective, suggesting that while the leadership change adds uncertainty, it could eventually be viewed positively as DXC repositions for long-term growth. They pointed out that Salvino's strategy, including efforts to limit declines in the Global Infrastructure Services (GIS) segment and potential asset sales like the Modern Workplace, had not fully materialized. They noted that the company's valuations of some 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,” analysts at Wolfe, reiterating its Underperform rating with a $22 price target.