Thursday, 29 December 2011

Is CSC heading for the cliff edge?

We wrote in our November 11 posting on this blog (CSC posts a loss – a massive one) that we had serious reservations about CSC’s EPS guidance given the risks and uncertainties it is carrying.  However, we did not expect a $1.6billion write-off arising from the NHS contract and yet there is still no assurance that CSC has put all the bad news behind it.

This must call into question the future and maybe even the survival of CSC.

What will its clients think of the events of the past 9 months, and of this latest unexpected large  write-off? Will they question the long-term viability of the company?  Will they feel confident that CSC will have the funds to make the investments needed to win and deliver the long-term client contracts which have been its strengths for so long?

Or will clients and potential customers think it more prudent to award such contracts to other companies in view of their doubts and the uncertainties surrounding CSC’s future?

Lack of confidence in a corporation’s future can become a self-fulfilling prophesy if major customers decide not to risk being dependent on a company which is viewed as shaky.  This will cause a drop in new business which then further undermines confidence in the company.

CSC needs to secure the confidence of its client base before it goes over that cliff edge.  
posted by Littlejohn

1 comment:

Jimmy said...

I am sure CSC is going down, it's a sinking ship and a terrible company to work for. In vain does senior management try to improve things, the only foreseeable rescue comes from a possible IBM acquisition.