Sears ends $1.6 billion deal with Computer Sciences

Retail giant says CSC failed to perform up to snuff, but the IT services company has a different view.

A $1.6 billion technology services contract between Computer Sciences Corp. and Sears, Roebuck has come undone.

In a public filing on Friday, Sears' parent company said the retail giant ended the massive contract May 11 "for cause," citing CSC's failure to perform "certain of its obligations in accordance with the terms of the agreement."

In its own filing Monday, CSC said it "is convinced the termination for 'cause' is invalid, contrived to avoid or reduce termination fees of tens of millions of dollars, and a breach of the agreement for which Sears is liable for damages." CSC also said it "believes it has demonstrated achievement of required services obligations in all material respects."

The feuding companies entered into the 10-year contract last June. The pact called for CSC to provide support for the retail giant's desktop and server computers, as well as for its voice and data networks. CSC also was to provide services for systems that support Sears' Web sites.

The demise of the Sears-CSC contract is further evidence that so-called "megadeals" may be going the way of the dinosaur. In another instance of a large-scale IT services pact dissolving, JPMorgan Chase last September said it would cancel a multiyear, $5 billion outsourcing contract with IBM.

According to the Sears filing, CSC "is obligated to continue providing (IT infrastructure support) services for an extended period following termination of the agreement."

The Sears filing also indicated that the matter has landed in court. "In pending litigation in federal court, CSC previously sought an injunction prohibiting Sears from terminating the agreement for cause," the filing states. The court denied that request "without ruling on the merits of Sears' assertion," the filing says.

CSC on Tuesday declined to speak about the Sears contract. A CSC spokeswoman said it was company policy to not comment on ongoing litigation.

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