Wednesday, 28 November 2012

CSC Breaking News

News has reached us that Guy Hains, President International, previously head of CSC Europe and before that head of CSC UK, has joined the Disappearings. Was he pushed? Did he jump? Has it got anything to do with the fact that his flag ship ten year outsourcing deal with UK's Royal Mail has never made a profit? See this news link here at Computer Weekly.
Or is it anything to do with the major problems at CSC due to another Hains led flagship contract, this time at NHS.
Or even is it because the  County leadership of Cornwall in the UK has refused to approve an outsourcing contract with CSC? See link here:
Other 'Disappearings' at CSC now include Gawie Nienaber ex-Legal lead for Europe. Where has he gone and why?
What is going on?
CSC CEO Lawrie does have to crack a few eggs at CSC in order to turn it around but it seems the restructuring is being managed in a crude uncaring manner, with news of major benefit cuts and lay offs being handed out. But with senior execs, like Laphen picking up tens of million as he exited, getting massive rewards and payoffs, while junior workers are dumped on.
Final point the speculation o n CSC's involvement in 'Renderings' flights just will not go away. See this link as an example:  Human rights charity Reprieve has gathered documents that it says demonstrate CSC had been contracted to this and other illegal CIA renditions
Is CSC too toxic to touch?

Sunday, 18 November 2012

CSC joins Starbucks, Google and Amazon in paying minimal UK tax on its profits

CSC Computer Sciences Corporation has paid just half a percent in tax on £1.5bn income it earned from the 10-year outsource deal it did with Royal Mail in 2003, Computer Weekly has revealed. 

The full article can be found on 

We note without any surprise that CSC was once more unavailable for comment on Computer Weekly’s article.  

CSC does not appear to care too much about its public image these days.  Before this story, its reputation had already been tarnished by its handling of the NHS IT project, its ambiguity in handling the allegations of involvement in torture, its attitude towards the Italian government and its treatment of employees it wants to unload. 

In the long run a company cannot succeed if it has lost the respect of governments, customers and employees. By why should CSC management care, as long as they have hit their bonuses, made a big profit on their stock options, sold the company and collected their money?

Monday, 12 November 2012

CSC Results - Is it the beginning of a real turn-round or window dressing for a sale?

CSC shares jump 17% after its Q2 FY2013 earnings release, analysts upgrade their outlook . Is it the beginning of a real turnround or just window-dressing for an early sale?

CSC shares jumped 17% and several analysts upgraded their outlook on CSC amid positive comments on its Q2 FY13 earnings release and analyst conference call.

The Q2FY2013 financial performance exceeded analyst expectations, confirming the Q1 halt in the continuous deterioration CSC has treated us to in the past. The company also increased its FY2013 EPS earnings guidance for the second consecutive quarter.

CEO Mike Lawrie and CFO Paul Saleh gave a good showing at the Analyst conference call, fielding the questions with confidence and giving answers that made sense. Such a contrast from CSC analyst conference calls of the past!

Here are some highlights of the results:
* Revenue at US$3.85bn was down 2.8% (0.5%in constant currency) from Q2 FY2012.
* Earnings per Share (EPS) were US$ 0.83c, compared with analyst expectations of US$0.47c.
* Free cash flow was US$237million positive, compared with over US$250million negative in Q2 FY2012.
* New business won in the quarter was US$4.2bn.
* The company’s EPS guidance for FY2013 was increased by US$0.20 to a range of US$2.30 to US$2.50.

It all looks pretty good at first sight. And it is a change from the shocks and constant deterioration of the past.

Mike Lawrie attributed the improvement to the measures and plans he put in place a few months ago. These include the cost take-out program, the drastic pruning of the management layers, the application of project management disciplines, the focus on problem contracts, a new operating model and fresh management talent which has been brought into CSC.
But before we join in the general enthusiasm, we need sustained performance improvement. The news coming out of CSC is not all good and we could be seeing short-term financial improvement to entice bidders for an early sale .

Here is a different interpretation of the results:
* CSC revenue continues to stagnate and contract while competitors grow.
* The US$0.20 increase in the FY2013 EPS guidance means simply that not all of the Q2 over-performance will flow through to the full year. It does not mean Q3 and Q4 profit will increase by a single cent. In fact, Mike Lawrie has implicitly dropped Q3 and Q4 EPS guidance by $0.16.
* The profit increase comes from reduced costs, which could simply be a direct consequence of the large restructuring charge in Q4 FY2012.
* A significant contributor to the improved cashflow is the low level of investment. CSC has invested less than US$200million in outsourcing contracts, property and equipment, acquisitions and software development in each of the last 2 quarters. It makes cash flow look better, causes short-sighted analysts to applaud, but can compromise the future, as long-term CSC shareholders know only too well.

There are troubling stories about CSC’s style in dealing with employees, not to mention governments, as disclosed in our 9 November blog entry re the sale of CSC Italy. Time will tell how much substance there may be behind the stories and, if true, what long-term damage they may cause.

We hear of some employees chosen for termination based simply on their salary level, irrespective of excellent performance records; of inappropriate and in some instances cowardly behaviour (in that they leave it junior HR staff to deal with long serving or senior staff) by senior managers towards employees who are being terminated; of high levels of employee absence among parts of the workforce and of organizational paralysis due to fear and confusion. We hear of the forced postponement of a planned round of redundancies because CSC had once again overlooked European legal requirements surrounding involuntary termination; was this due to lack of knowledge, management incompetence or was it an unsuccessful attempt to simply ignore unwelcome constraints in laying off unwanted employees? 

Is CSC creating the right organization and workforce for its future, or is it just getting rid of “expensive” employees to improve short-term profit?

Where is reality situated, between the improved results and impressive words on the one hand and the abrasive management style on the other hand? Will we see a sustained move back to CSC’s former position as one of the global leaders in IT services? Or are we just seeing cynical short-term improvement measures to attract a buyer , and allow Mike Lawrie and his management team to earn a lot of money, before CSC collapses again.

Friday, 9 November 2012

Italian Government criticises CSC's 'offensive behaviour'

CSC has completed the sale of much of its Italian business to Dedagroup, but has done it in a manner which has angered the Italian Government to the point that they have strongly criticized CSC’s lack of respect and consideration for Italy in a letter to CSC CEO Mike Lawrie and the CSC President for South and West Europe Claude Czechowski. 

According to the Italian business newspaper Key4Biz, CSC had agreed to meet with representatives of the Government and employee unions to discuss the consequences of the sale of its Italian business, especially in view of the possibility of the sale causing 500 job losses, before taking any final decisions.

However, despite this agreement, CSC proceeded with the sale without taking account the need to formally declare “a state of business emergency” and without recourse to mediation with the Government and the unions.

"In a letter of 3 July we asked for your willingness to discuss with us the consequences of your decision to sell the Italian branch of CSC - reads the letter to CSC signed by Giampietro Casano of the Department of Enterprise and internationalization. “After a meeting with your legal team we were informed CSC had not taken any decision regarding a potential buyer. Further we planned a meeting at our ministry with CSC and trade unions. On this occasion your legal team asked us to postpone the date of the meeting to ensure your participation”.
CSC did not turn up for the planned meeting. Instead on the same day they announced the sale of their Italian business to Dedagroup.

"Your behavior - concludes the letter by Giampietro Castano - is considered offensive and not in line with the behavior expected from a multinational company like CSC."

The Key4Biz article can be found at;

This episode does not show CSC in a good light; Once more CSC is giving the impression of arrogance towards the representatives of public interests.  But does any President in CSC from Lawrie downwards care what any government in Europe thinks of the company’s behaviour?