Saturday, 17 September 2011

Is CSC heading for another quarter of poor results?

In removing Russ Owen from his position as President of CSC's Managed Services Sector (MSS), Mike Laphen has sent a message to the organization that he will not tolerate failure from anybody..... except from himself of course.

If Mr Owen was removed solely because of the Q1 (June 30) results,but the rest of the financial year's outlook is acceptable, why wait two months then act in September?. His removal in September suggests he has been unable to get the fiscal year outlook back on track.

Interestingly Mr Owen 'stood down' on September 16, just when CSC buiness units submit their last Q2 (Sept 30) financial forecast to Corporate headquarters. Could his fate have been sealed by his submitting a profit forecast below what Mike Laphen wanted?.

These factors suggest that  CSC's Q2 (to September 30) results for the MSS sector could well be poor, as they were in Q1. Will there be any tax credits or other one-off financial accounting credits to recover the situation this time?

The whole Outsourcing/MSS industry sector has been experiencing profitability pressure for some years now as it matures and commoditizes.  CSC has consistently cut and/or deferred planned and needed service delivery and technology investments to protect "this quarter's profit", but each time at the cost of mortgaging its future a bit more. Perhaps CSC's  disappointing results are now reflecting the consequences of this approach. Maybe this is where the rubber hits the road, or where something more unpleasant hits the fan.

No comments: