Monday, 25 May 2009

CSC Results

It is good to read that CSC has reported 'strong results' for the last quarter, showing a growth year on year. However, what has been overlooked in any reports I have seen is;
1. All businesses except US Dept of Defence showed a revenue decline in Q4 Fy09 compared to Q4 Fy08.
2. There was a tax credit of $36m in Q4 Fy09 compared with a tax charge of $10m in Q4 FY08...making a $45m "swing" in EPS compared to pre-tax profits.
3. CSC has spent large sums on share buy back schemes that do not appear to have improved the share price. What was the motivation behind this expensive blunder?
Isn't it strange how these points have not been picked up by the market analysts?

On the subject of analysts; perhaps they ought to measure the value of IT Services companies on more than just current results. What really matters to the continuing success of any IT Ser is the ability to sign repeat contracts and grow business via pipeline of properly qualified and quantified opportunities. Rather like oil companies they have to have new supplies of business in several stages of development from discovery through to production. If I remember rightly several years ago Shell was lambasted for getting its oil reserves book wrong even though its current results were good.
IT Ser also have 'reserves' that need quantifying in order to measure the future value of the business. The smart analysts working for firms like Citigroup, Stifel Nicolaus, Jefferies & Co, Prudential, UBS, and Credit Suisse, who are all publishing comments and recommendations on IT servcies companies should perhaps look at how this might be accomplished.

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