by Littlejohn - a guest contributor
The only surprise about CSC cutting its FY2011 earnings forecast is that anybody who follows the company could be surprised by it. In fact if analysts were doing more research about how the company is run and its people they might learn more than just by studying spreadsheets and the company's own propaganda. Here's why;
For some years now, CSC's Corporate management has imposed unachievable revenue and profit targets on its operating units without heed for market conditions, client needs, service delivery needs, investments needs and other support requirements. .
CSC's Corporate management refutes any news it does not like, such as an operating unit's inability or difficulty to meet budget. It rejects the input of the operating management with suggestions that the real problems are lack of commitment and effort. .
As operating performance falls below Corporate's unrealistic expectations. further arbitrary targets are assigned to business units, Operating management becomes disillusioned. Some decide to stop trying to tell the truth as they see it, as the Corporate management is only interested in hearing what it wants to hear.
Over these few years, investments in technology, service delivery, sales and staff development have been curtailed. Salaries are being reduced in the US. More attention is put into multi-layer micromanagement of costs than into generating sales. Revenue growth stalled some time ago. Now the costs barrel has been scraped to emptiness. CSC has no cushions left.
The lack of revenue growth, the inappropriate accounting issues in Nordic (now subject of an SEC investigation), this week's drop in earnings forecasts and CSC's high turnover of senior executives are all related. They are the results of CSC's current management ethos. Until this is changed, CSC will continue to decline and its share price significantly underperform expectations and competition.