We recently wrote about CSC’s “failing fundamentals” and it has not taken long to get another of these shocks which are becoming the norm for CSC.
Today, CSC disclosed in a regulatory filing that it may have to write off all of its $1.5bn investment in the troubled NHS contract. It also withdrew its earnings guidance to Wall Street and saw its share price immediately fall by 8% .
Details are given in the Wall St Journal:
and also in PC World:
and in PCAdvisor : which highlights the arrogance of CSC management who are quoted as stating that "government has no right to cancel the contract".
Recently CSC’s Q2 FY12 earnings call and its 10Q SEC filing of November 9 referenced risks relating to the NHS report, but did not the impression there could be a massive write-off in just a few weeks time. Was this why Messrs Laphen and Mancuso’s answers and comments during the earnings call seemed so evasive?
Will CSC now tell us :
1. Why has the NHS situation seemingly deteriorated so significantly since CSC gave an update on November 9? Were Messrs Laphen and Mancuso overly optimistic in their assessment of the situation at the earnings call? Or were they out of touch with the reality of the situation? Or were they misleading investors and the government of the UK?
2. In view of this collapse of the NHS contract, what is the real value of the iSoft acquisition and of the Lorenzo software today? Can we expect further goodwill write-offs due to reductions in their underlying value?
3. The many people and journalists who over the past 3 years warned that NHS was doomed to failure are being proved correct. Why were the warnings ignored for so long by CSC management?
4. Why is no CSC executive being held accountable for the NHS failure? Why is the European President who was personally responsible for the NHS still in place?
Earlier this month, we said that
The major financial uncertainties surrounding CSC (shareholder lawsuits, SEC investigations, customer disputes, NHS etc) would scare off any buyer.
Today’s announcement by CSC just underlined this point.