Monday, 3 February 2014

CSC – Q3 FY2014 earnings call. On the one hand but there again on the other!


CSC – Q3 FY2014 earnings call – more of the same!!


CSC announced its Q3 FY2014 earnings and held its Analyst Conference Call last week. And it was “more of the same” with continued earnings and margin growth, beating Wall Street expectations, allied to continued revenue declines and lackluster new business wins. But the markets seemed to buy it all, as the share price surged 10% after the announcement, to break US$60 for the first time in years.


Highlights of the Q3 FY2014 results were:


* Revenues totaled US$ 3.228 billion, down 9.7% from the US$ 3.536 billion recorded in Q3 FY2013, but flat with Q2 FY2014.

* Operating margin of 9.8% compared to 7.4% in the same quarter of FY2013.

* Net Income of US$ 141 million, being US$ 30 million higher than the continued operations equivalent of Q3 FY2013.

* EPS from continuing operations reached US$ 0.98c per share, up by US$ 0.25c from Q3 FY2013, and US$ 0.34c above the consensus of Analysts’ expectations.

* New Business Bookings totaled US$ 3.3 billion. This compares with US$ 2.9bn in Q2 FY2013, but US$4.2bn in Q2 FY2014.


The Analyst Conference was also “the same old song”, being very professional with lots of positive statements about the quarter’s results and CSC’s future prospects.

CEO Mike Lawrie and CFO Paul Saleh gave their usual articulate and polished performances. They answered the Analysts’ questions with assurance and gave the impression of really knowing what is going on in their business. They talked confidently about Cost Take Out program, alliances and acquisitions, strength in cyber and cloud, working on next generation offerings, revitalizing the sales force and even a few anecdotes about the mess they inherited when they came to CSC. But no mention of the latest class action suit regarding none performance of a health service contract in USA.

The analysts, as before, cooed in awe at the accomplishments and figuratively tossed up easy balls for Messrs Lawrie and Saleh to hit. The only potentially difficult question concerned an update on progress (or lack of) against expectations in achieving revenue. Mike Lawrie adroitly kicked this into the long grass of next fiscal year.
It was all so upbeat, confident and accomplished that we could almost believe it, except for the nagging reality of the very different story we hear from CSC employees and yet another law suit alleging non-performance. 
What is really going on? Go ask Alice - click here.





41 comments:

Anonymous said...

Ah yes, the window dressing continues at CSC. The killer is the fact that new business and revenue are flat at present, and will begin to decline as existing contracts come to and end. Those wonderful improvements due to "Cost Take Out" (translation: firing more and more people every day in a desperate attempt to hang onto money and legally cook the books) can't go on forever. As it is now we can look forward to a future earnings call where Lawrie and Saleh are the only employees left, with Lawrie giving Saleh the sidelong glance as the next target.

Meanwhile there continues to be disturbances in the ranks, as once-touted new leaders are giving a new definition to the "short stay career stop". If Lawrie can't hold onto his annointed, what kind of leadership is being demonstrated? The new operating model is still in a shambles of confusion a year and a half after the grand scheme was envisioned, suffering from the revolving door syndrome at the senior level while promoting and continuing to nurture the same incompetents that put CSC on the ropes in the first place.

In the "taking your own medicine" category CSC continues to bumble and fumble on strategic projects that are the lynchpin of turnaround efforts. If they can't execute technology projects efficiently and in a realistic manner on their own behalf, God help the unwary customer who falls victim to the marketing and sales hype.

Thinks can't go on this way much longer. One has to wonder if Lawrie's true mission is to inflate the stock price by any means available to facilitate a quick sale at a premium price. CSC has been the subject of sale rumors for years, and it's obvious there's no long term growth and stability plan in place.

Anonymous said...

I've noticed with interest the numbers of bosses at other companies forgoing their bonuses this year.

I wonder if that will apply at CSC? I suspect not since the main effort has been to ensure that people below the very top layers are told they are not eligible for a bonus, or that the criteria for giving them a bonus has changed and the happy few that are still entitled to something are then modelled against a system that requires their managers to allocate a certain number of them as "failing" regardless of actual performance.

Anonymous said...

Its a difficult one to judge to be honest. The Mike and Paul Show is a very slick PR operation, the analysts call was a text book exercise in lion taming and the market response was massive.

It's important to understand though two things:

1) From Lawrie's perspective maximising share holder value (aka Share Price) is his actual real #1 objective. It's no secret, its published and accepted.

2) Wall Street has no interest in the long game, only inflate and sell.

Neither of these things necessarily reflect a turn around of CSC's actually operations directly - at least in the short term.

My take aways from the call were slightly different to Busy Bee's though - things I focused on were:

a) Germany only dodged the staff cuts because some big business was in the pipeline and having a Works Council dispute on their hands would damage the prospect of completely a big contract - this has to be Allianz. With that deal blown, I'm guessing the backlash will be a pile of German heads.

b) In recent communiqués the mantra has been "Cyber, Cloud, Big Data", not just in analyst calls but on the bottom of every press release and suddenly this episode focuses on GBS and GIS - two pieces which previously had been declared "old hat". GBS took some savage casualties in the last year and GIS of course is the unprofitable old business of doing IT. Sounds a bit weird to you? Does to me!

Two things looking forward from here though:

c) They will be called to account over the numbers as Busy Bee pointed out.

d) The rumours of a NPS sell off have been denied "at this time", which could mean next week everything is different.

We shall see...

Anonymous said...

Personally... I would like to see the scabs who came to Denmark from the UK get "reduced".

Den danske CSC har ikke glemt de kolleger, som vi troede var venner, men viste sig at stikke os i ryggen.

Anonymous said...

Referring to comment of from Anonymous of 09.34 today regarding German staff cuts.

Mike Lawrie's implication that these were deferred to avoid interfering with the failed Allianz bid is a half truth at best. CSC had to suspend the redundancy plan because they had failed to follow German labor law requirements. This suspension would have happened irrespective of the Allianz bid.

Anonymous said...

As to Big Data, most of the US Big Data team was let go at the end of December, thus there is nothing to talk about. It is interesting how something so hot is suddenly so cold.

Anonymous said...

Continuing the theme of Alice’s Adventures in Wonderland Mike Lawrie reminds me of the Cheshire Cat. He’s always grinning like the Cheshire Cat in any photo or webcast I’ve ever seen. Why is that?

The answer may be in the results of his and Paul Saleh’s actions to drive the share price ever higher with no thought for the impact of their actions on employees, customers or the communities in which CSC operates.

Take a look at the SEC filings on CSC’s website. http://www.csc.com/investor_relations/ds/34081-sec_filings
Search the Form 4 filing on 05/22/13. On 05/20/13 as a result of just one part of his compensation plan Mike Lawrie was awarded 262,369 share options at $44.65 to vest in three equal annual installments with the first installment vesting on 05/20/14. With the share price today $58.60 this part of his FY12/13 compensation is currently worth $3.6m and that goes up with every increase in the share price. Maybe that’s why he always smiling.

And to continue this train of thought if Mike is the Cheshire Cat maybe Alice is a typical CSC employee, one like you and me that doesn’t have a bonus or share option scheme. In that case this quote might be appropriate:

‘In THAT direction,' the Cat said, waving its right paw round, 'lives a Hatter: and in THAT direction,' waving the other paw, 'lives a March Hare. Visit either you like: they're both mad.'

'But I don't want to go among mad people,' Alice remarked. 'Oh, you can't help that,' said the Cat: 'we're all mad here. I'm mad. You're mad.' 'How do you know I'm mad?' said Alice. 'You must be,' said the Cat, 'or you wouldn't work* here.'

*Apologies to Lewis Carroll

Anonymous said...

Big Data gone? Wow... that was short lived.

Germany ducks the bullet on a technicality and fails on Allianz... there's going to be pay back on that I'm quite sure.

I hear the next idea is to continue with the fire sale and dump another area of the business, no, not NPS.

Probably not many of you pay much attention to IBM, but if you read up on their last 2-3 years of activity you will see that CSC is copying their playbook.

Never thought it was a good idea to be a follower in this industry...

Anonymous said...

No, never any talk of the failing "New Business Model". The fact of the matter is that CSC is trying to play with the Big Boys in the emerging technologies, and does not have the will to invest the capital required - even if they had it or could leverage it - or the ability to do so. Compete with the likes of IBM, HP, and now, for goodness sakes, the Googles of the world? Sheer madness.

It all sounded good on paper a year or so ago as part of the cheerleading grandiose plan, but the proof is in the money coming in, and the proof is lacking. Sure, they tout a win or two here and there, but certainly not on a scale that will make a long term difference. If the major players are struggling to define these products and markets then CSC has no hope.

As is mentioned elsewhere in this thread, there seems to be a gradual pickup of interest in the "old" businesses of GBS and GIS. Is this a mystery? As the new lines are failing there's a scramble to return to the once tried and true sources of revenue. But wait! There's more! Surprise! These are the very business units that were gutted in the "Cost Take Out" efforts to cause the (as we shall see) temporary spike in the stock price. Many long term and dedicated people were shown the door, and the rest are becoming Masters of Apathy while surviving the Slash and Burn business model. Couples with the entrenched surviving incompetent middle to senior level mangement left in place, it will be interesting to sit back and watch the continual decay and destruction.

Of course by the time this becomes evident and unavoidable Lawrie will be long gone with his 30 pieces of silver and Wall Street will have picked the bones clean.

Anonymous said...

I hear that CSC has a very bad reputation in India for paying very low wages and being dishonest with employment contracts. I would be interested to know if this is true. If it is true, it is not surprising that turn over in India is very high. Turn over in the US and Europe is picking up. So I guess Mr. Lawrie is going to be pushing his new sales staff to sell services which are manned by a skeleton crew with little to no experience.

Has anyone noticed that with Mr. Lawrie says, "cost take outs" he smiles like a 3-year old saying "birthday cake"? He is having an excellent time sacking good people. Cheers Mr. Lawrie. Smile away.

Anonymous said...

The original plan to take out cost was directed and focused and done in a manner in which outsiders would see it as professionally run and managed. More recently, though, cost take out is happening because the company has taken steps to create an environment hostile to employees. The result is that instead of being shown the door with a pink slip, employees are leaving on their own accord. I personally believe this is part of their continued plan to remove "expensive" employees and replace them with much cheaper and inexperienced employees.

Frankly, their plan is working. I was recently informed I am no longer part of the bonus structure while also being demoted (organizationally, not responsibility-wise). Of course, when I say informed what I mean is I found out after the fact using their internal employee HR system. So I will be looking to jump ship soon while taking all my knowledge and experience with me. Of course, I am also taking my knowledge of how CSC does business so it should be pretty easy to continually beat CSC during contract bids.

Anonymous said...

Last Friday at 12pm we were told our project was not funded, and they told 8 of us not to come to work Monday. Then I get an email at 4:30pm saying they have to start the RIF process, made for a great weekend. I was told not to go in on Monday, but I did anyway to get my personal belongings, tidy up, and let the customer know what was going on.

I hear Monday afternoon that money is coming from the customer and that we should be working by Wednesday. One of the people let go/or not let go works for HP as our sub-contractor. His company put him on paid Administrative Leave knowing that it was a new financial system and that it was a hiccup in accounting. This is the only contract I have ever worked on were it is detrimental to work as the prime!

CSC is a joke and their new business model has a new "Home Group Manager" that act's as an offerings manager. Yes thank you for the .5% pay raise last year! This is the same fool that sent us an email saying that we would start the "RIF Process" and didn't bother to contact the BM as in Business Manager. And this new BM just started work last week on the project and was left with this shit sandwich.

Too many chefs in the kitchen and it's not working to well right now. More will be revealed!

Anonymous said...

> while promoting and continuing to nurture the same incompetents that put CSC on the ropes in the first place.

'We can not solve our problems with the same level of thinking that created them'
— Albert Einstein

Anonymous said...

IBM news http://www.theregister.co.uk/2014/02/12/ibm_layoffs_india_europe/ - so when for CSC India? Next year probably..

Anonymous said...

Don't know what's going on. Management layoff is reching a new peak. HR global exec fired, new top managers in europe. But that's not all. At least one cv of the new top's is a fake.
Who can you trust in these times?

Anonymous said...

What's going on is short term objectives to line the pockets of the new management chain. Costs are being forced out one way or another while revenue has dropped, but EPS has grown. Considering that's the metric they're being judged by, that's great for them but lousy for the long term prospects of the company. CSC is in ruins and these asshats are taking the money while they can.

Anonymous said...

Indeed they are taking the money.

A couple of interesting filings with the SEC on 02/07/14 – for full details visit http://www.sec.gov/cgi-bin/browse-edgar?CIK=csc&Find=Search&owner=exclude&action=getcompany

On August 13, 2013, the stockholders of the Company approved amendments to the 2011 Omnibus Incentive Plan that increased the number of shares available for issuance under the plan by 8,300,000.
This plan is the method for Lawie, Saleh et al to get most of their gains out of CSC. If I’ve read it correctly another 8.3m share options available – unbelievable!

On August 13, 2013, the stockholders of the Company approved amendments to the 2010 Non-Employee Director Incentive Plan that increased the number of shares available for issuance under the plan by 150,000

Anonymous said...

8.3 million shares? At $60 a pop that's 480 million dollars! Almost half a billion!

At least Dick Turpin had the decency to wear a mask....

Anonymous said...

The newest attempt to force people out is the appraisal mandate that came out from CSC Corporate to fit folks into established appraisal level percentages. Basically, X% into Exceeds Expectations, X% into Meets Expectations, X% into Partially Meets Expectations and finally X% Did Not Meet Goals.

In other words, even if your entire team is made up of perfectly competent and effective personnel, you MUST fit the established percentages.

As soon as I can, I am leaving this company. I am interviewing and have some very good leads at the moment. CSC is dead.

Anonymous said...

Sounds like Mikey has been reading Jack Welch's book -

http://usatoday30.usatoday.com/money/companies/management/2005-04-17-welch-advice_x.htm?csp=34

"Jack Welch long ago decided that every employee at General Electric should be ranked top to bottom. The top 20% were stars to be nurtured and given incentives to excel. The middle 70% were also crucial because they made up the majority. But a smart company would identify the bottom 10% and weed them out. ..."

I'm sure Mikey is smiling. More opportunities for cost take outs. Smile Mikey, Smile...

Anonymous said...

That "performance" nonsense has been there for years, they've just never admitted to it to employees. Its actually refreshing to see them being honest on this (at least!)

Most employers use similar tactics to "performance manage employees out" if they want to get rid of people on the cheap. Its also the only way now retirement age is no longer enforceable to get rid of "old people".

Nice eh? Work your entire life knowing that eventually someone *will* fire you.

Anonymous said...

Dear Casandra,

An Idiot’s Guide to CSC Appraisals or should I say An Employees Guide to CSC Appraisals

Rating spread – does exist, HR will not formally say it does. Call it the “bell curve”. Many emails on this within the organisation, just not shared with the masses.

Along the lines but is open to fine tuning

5% 1 25% 2 65% 3 5% 4/5

Managers get a higher percentage 1 and 2 ratings, why is that? A manager will highly rate his/her managers which then puts pressure on the bell curve, again the masses bear the brunt and have to deliver more 3 and 4/5 ratings for the curve.



End of appraisal – will not be told overall rating, why? So levelling can occur. Ask for the rating at end of appraisal – make appraiser say it and follow it up in writing. This makes your individual leveling more challenging. You have been told got a 2, harder to change that to a 3. You have not been told your final rating, implied you have a 2 rating. Leveling – easy move it to a 3 as not verbally or written down. You lose.



Appraisal overall rating does not affect pay rise – Yes it does. 4 or 5 rating no pay rise. 1 rating – good chance of pay rise, 2-3 slight chance (would say 3 unlikely). Ask your colleagues – anyone with a 3 (which means good meeting all requirements) – most will say no (if not all).



HR receive breakdowns all provisional ratings and then leveling commences and reviews. Want to see it? I am sure under data rules if requested can….



Appeals

If you are given a 4 or 5 rating but had not interim performance reviews or not been told performance as you go through the year does not meet requirements this is enough to appeal and win against a 4 rating. Your appraisal manager has failed to set expectations and support you if not meeting requirements throughout the year. Dropping it on you at end of year with no prior notice is wrong. How can you improve to 3 or above if not told through the appraisal year you are not meeting expectations for a 3? Are grounds for a strong appeal. Get union if a member to assist you.



Your appraisal is excellent, wordings are great, and ratings are good and then get a 3 or lower. Grounds for appeal. Weak managers will say how excellent you are to your face then you have an average rating. If appraisal worded and meet criteria for a 1 or 2 – that is what you should get regardless leveling. Grounds for appeal if wording/ratings in appraisal do not actually final overall rating.

Redundancy ratings – remember your appraisal rating may well be a Work Council/Union/HR agreed rating factor comparing against peers for redundancy. You got a 3, colleague a 2 – could be the difference between a pay rise and being made redundant.

People may be marked down so they are in the firing line for next bout of pink slips.

Jack Welch quotes

You got to be rigorous in your appraisal system. The biggest cowards are managers who don't let people know where they stand.

Anonymous said...

For once someone at CSC says it how I presume it is... Respect!

Anonymous said...

Such ratings does not match with local law of some countries in europe. Or to be clear: it's illegeal. That's the way CSC has decided to go.

Anonymous said...

The ranking of employees is in full swing. Mike Lawrie is sharpening his sickle again and is smiling about the harvest of cost take outs when he fires the "bottom" 10%. Sadly with all the cost take outs he has done thus far, he will have to shed excellent and billable employees to achieve this goal. Watch the revenue shrink as billable employees are cut and the top tier employees leave in droves because they are left holding the bag. Nice going Mr. Lawrie.

Anonymous said...

Anyone know about key staff lists? Thought not....

Anonymous said...

As others have said, I think the plan from the beginning was to make CSC attractive for a takeover.

Anonymous said...

CSC is a horrible place to work.

Anonymous said...

The question is how much longer Lawrie can maintain the profitability and thus the stock price to get CSC sold around the price they want.

Anonymous said...

CSC is like a car rental company and its employees are like cars. Clients can do whatever they want with the car, but they must pay four times their real price. Clients must put gas in the car, and if they keep it long they must clean and vaccum it. Normally nobody cleans them and they put the cheapest gas. After a few miles, once the client has used and abused the car, it's returned. CSC does a fast clean and check and rent it again. Once the car has 30.000 miles, due to its poor maintenace it has to be sold. They sell it almost as junk and get a newer younger and cheaper car that eventually will end up as its predecersor. No wonder stock prices are getting higher and higher!!! it's a great business model for the ones on top, but it's a fast burning environment for employees.

Anonymous said...

I left, and I am so much happier for it.

Moving somewhere else helps you realise what a demoralising place it is to work. I hope my former colleagues are able to leave before things get even worse

Anonymous said...

Another round of cuts taking place to yet again decrease costs. It's almost to the point where only Direct Billed employees are left to not only execute, but to also perform Finance, Marketing, B&P, Capture, HR and Contracts.

Senior management's efforts in looting the company (rising stock price and their options) at the expense of the employees should be complete around 4/1.

Anonymous said...

BS!! im no CSC fan but who said another line of cuts? in the UK and other regions we are moving into the next phase of Get fit! Also appraisals have been like this for years, who said that the bottom tier will be made redundant? we have laws in most countries and whilst warnings can be given for poor performance, and this would be taken into consideration IF CSC goes through another get fit phases, presently there is no plans to revisit get fit.

Anonymous said...

Erm, there is another round of cuts, where they fall is unclear. As to the bell curve, that's a pretty open secret - poke around. It's not that they WILL be made redundant, but that they should be managed out.

Anonymous said...

I would say poster 13:33 is delusional..

Anonymous said...

I'm sure it will all be more fun with our new Indian overlords:

http://www.theflyonthewall.com/permalinks/entry.php/CSCid1975821/CSC-CSC-volatile-after-Danish-paper-discusses-possible-takeover

Anonymous said...

CSC is REALLY pushing to fire 10% of their folks. Another data call went out to ensure folks are put in the Partially Meets and Does not Meet categories, even if you DON'T have anyone that actually deserves it. Not that it matters anymore....once the Indian company buys what's left of CSC, it will implode.

Anonymous said...

Cost take out continues. i heard from one of Mike's mercenaries in the UK that a further $1.5bln has to be taken out of the cost base. If that does not 'hollow out' the company I donn't know what will.
The mercenary is crowing all the to bank as he is ready to move on after collecting his blood money.

Anonymous said...

I'm sure if CSC is taken over the new owners will not care much who stays at CSC and who has left. They will have their own talented people to the work. They can keep the valuable parts of CSC and dissolve the rest.

Anonymous said...

No Matter what anyone says, this was a forced ranking . . .

Anonymous said...

CSC is a very bad place to work. They lay people off but increase the amount of paperwork no end. Recently to book a single overnight trip took me 4-5 hours completing CSC internal paperwork. My line management is not trusted to make business decisions so it has to go up 3 or 4 levels to get authorised.

Add to the that no pay raises year after year even with good appraisal scores. Then factor in subtle job changes so they can take away car allowances, overtime, oncall payments etc without compensation. No wonder most people I work with are now just treading water waiting for redundancy.