Tuesday, 22 April 2014

And then there were none.............

Our correspondents have confirmed that James D Cook, the last surviving member of former CEO Michael Laphen’s Senior Executive Team, has been terminated by CSC. We wonder why. 

Jim Cook survived over 2 years since Mike Lawrie took over as CSC CEO. So he has not been fired because of his previous association with Laphen; nor can Lawrie have needed two years to decide Cook was not up to his job. We think the reason for Jim Cook’s departure may become evident when CSC announces its Q4 FY2014 results next month. At the time of CSC’s Q3 FY2013 results, we said in our 6 February 2013 blog entry that we thought Mike Lawrie would aim to peak CSC’s share price about 12 months from then, around February 2014, then would maintain it at that level for a further 6 months to give time to sell off CSC. We may have been over-optimistic about Lawrie’s ability to maintain the share price for a further 6 months. IBM shares have recently been sanctioned by the market for disappointing revenue results. CSC has that problem, plus sizable cracks appearing in the supporting wall called “technical excellence” due to its employee terminations and cut backs. Unexpectedly poor results in CSC’s Q4 FY2014 could change the view of the markets and any prospective acquirers.




A Footnote

Lest readers forget it is worthwhile summarising some of the earlier posts about management. 
Firstly the problems with CSC performance have a long gestation. In the late 1990's and early 2000's CSC had a management team in place who most years oversaw double digit growth  along with good profits. As with any large company changing and growing and fast there were some problems but in the main clients wanted what CSC was selling. Then the rot set in with over promotions of some people who let their 'success' go to their head. This led to most of the European management team leaving from the mid 2000's on. With the exception of two Presidents virtually all leadership left within a two year period. At the same time every single Finance chief in every country in Europe left as well. Now why is that you might ask? Were they no good and unable to keep up with the growth or was something more fundamental happening? All you can do is note that within a couple years of these key players leaving CSC's decline started. Then the US and other countries started down the same road of poor performance and flagging sales.  Were they infected by some virus that moved from Europe across the company?

Also worth noting is that none of the law suits from investors and clients date from that time. They occurred on the watch of the next generation of management put in place by the 'over-promoted'. This next generation is already being superseded by third and fourth generations who seem to have a short life span. Hence the recent postings about 'disappearings'. 

As we have said before "only time will tell who is right".  
Next month might be the time.

56 comments:

Anonymous said...

If I’ve read recent insider transactions correctly Mr John Michael Lawrie is cashing in again. On 03/28/2014 he made a non-open market deposition of 20,480 shares @ $60.29 at a total value of $1,234,739. He also exercised another 50K options. But he still has some way to go.

In the FY12/13 Annual Report CSC reported that the Number of securities remaining available for future issuance under equity compensation plans was 12,049,759. (The majority of these are available to Lawrie et al under the infamous 2011 Omnibus Incentive Plan). The Weighted-average exercise price of outstanding options, warrants and rights was $37.21.

Simple math.

Revenue at today’s share price of $60.85
12,049,759 * $60.85 = $733m

Cost (using the weighted-average exercise price)
12,049,759 * $37.21 = $448m

Profit Potential
Revenue ($733m) – Cost ($448m) = Potential Profit ($285m) Way to go!

Anonymous said...

Correction: Bill Deckelman, CSC's General Counsel is the last surviving member of Laphen's executive team. Why has Mr. Deckelman survived when the fraud related to NHS and elsewhere in CSC occurred on his watch? Any thoughts?

Anonymous said...

His brown nose probably longer than others...

Anonymous said...

And Mr Brian Fillebrown of DA? He has been around a fair while .....

Anonymous said...

Could it be that Messrs. Deckelman and Fillebrown know where the bodies are buried? Certainly the performance of both has been substandard long term. As noted above, Mr. Deckelman was on watch while massive fraud was going on in Europe, and of course has been busy plugging the holes in CSC's legal position. As to Mr. Fillebrown, his organization is solely tasked with ensuring improved governance and performance of CSC's engagements - but when looking at the massive debacle of the NHS program in the UK, the chronically problematic North Carolina Medicaid program, and innumerable smaller (relatively, by size and sensationalism) but important customer projects - the failure to provide oversight due to chronic coverups, self-serving staff continually bowing to management, and lack of intestinal fortitude to present the truth point to a house of cards that can't long escape Mr. Lawrie's attention. Perhaps Mr. Lawrie has been so busy working down his executioner's list he just hasn't had time to deal with these two yet.

Perhaps he has to have another sacrificial lamb or two on hand for the upcoming disappointing end of quarter and end of year financials?

It will now be interesting to see if, with the departure of Mr. Cook, if his hand picked incompetent cronies further down the chain are in the cross hairs. My bet is yes, eventually, as the rotten onion is further peeled back.

Anonymous said...

Not looking good is it ?
Hmmm, time to get that resume up to date I think !

Anonymous said...

Probably past time for them to get those resumes up to date. Sure like to read them . . . "Experienced Executive Crony Seeking Position of Hidden Mediocrity . . ."

Certainly CSC has outstripped its management's ability to develop and grow and solid and thriving company - Lawrie is just the latest in line, but his job is easier since it only involved artificial inflation and selling off the pieces. Come to think of it, he's not even doing a good job at that.

Anonymous said...

It is interesting to note that Mr. Deckelman was the chief legal officer at Affiliated Computer Services (ACS) when ACS had fraud problems.

http://en.wikipedia.org/wiki/Affiliated_Computer_Services

http://washingtontechnology.com/articles/2007/07/11/acs-settles-federal-fraud-case.aspx

Anonymous said...

I'm not concerned about high levels of executive pay, but abject performance is quite another thing. Lawrie and his 2nd in command (girlfriend Jo Mason) have bought the entire Mckinsey menu and have foolishly attempted to complete deep brain surgery, heart and lung transplant, bone marrow replacement and gender re-assignment all at the same time! However, contrary to reports, CSC has not been turned into a Frankenstein monster of a company. It is in fact a walking cadaver!

Anonymous said...

"Abject performance" could be the understatement of the year. CSC is ill-equipped with both management talent, capital, and organizational culture to compete in Lawrie's vision of a transformed company. CSC can't play "me too" with the likes of IBM, HP, Google, Amazon, and other big name companies in the Cloud / Big Data / other Lawrie fantasies that are supposed to be the future. Killing off established streams of revenue while talking about markets you can't penetrate is a sure recipe for disaster.

Previous contracts and business models were fundamentally sound until management's insistence for unrealistic profit and growth rates. Once arrogance and greed took hold it was a simple matter of bad management that created unprofitable engagements.

Wonder who Lawrie will blame for the upcoming bad financials for end of year and end of quarter? Has James Cook paid for the sins sufficiently, or will the mob require additional pounds of flesh (excluding the rank and file who are suffering continuous layoffs now in the name of "Cost Reduction").

Anonymous said...

Interesting but not surprising. One might surmise that Deckelman and Fillebrown are surviving because they are the ones that can surpress / dilute / defer reality and truth and are therefore Lawrie's bulldogs. Amazing that the serious events with fraud in Europe and billion-dollar contract failures didn't attract any senior management attention, so there was either damage control internally or incompetence, neither of which are attractive.

Anonymous said...

How lovely to read when looking for a job after CSC made redundant and wondering how going to meet bills.... very depressing and no doubt he does not lose sleep over it. Unlike myself trying to get a job!

Anonymous said...

http://www.bizjournals.com/washington/blog/fedbiz_daily/2014/04/csc-begins-rating-employees-on-an-extreme-bell.html

I think that the disconnect between the "elite" class at CSC and the people that actually do all the work to keep the company moving was classically illustrated at the last all hands meeting by the off hand comment of one of the high level managers. That all the actions they had spoken about at the meeting so far would help in the reduction of "Swivel chair activity"... -The implication that in the view of the "elites" an actual professional doing complex and profitable work was not even a person and could be summed up as some sort of "invisible phantom" that does nothing other than "swivel chairs around and cost CSC money"... The "slang" that evolves and on occasion gets slipped from an isolated group that does unaccounted activity can give clues to their internal workings and ideology.

Their actions of course speak the loudest.

Anonymous said...

CSC will release financial results on May 8, 2014 and will host a conference call at 5pm EDT. The dial-in number for domestic callers is 877-719-9786. Callers who reside outside of the United States or Canada should dial 719-325-4893. The passcode for all participants is 5785862. Prepare to be amazed, bejazzled and wrong

Anonymous said...

Wrong about what? They can maintain the smokescreen for another quarter or so, as long as they have more employees to "cost reduce". Stock price and the actual long-term health of a company are not always the same.

Anonymous said...

If I were making millions and only had to fire a couple of employees to get another tank of gas for the corporate jet . . . well, I personally would lose sleep over it, but not Lawrie and his Wall Street Masters who want to show good financial statements and stock prices regardless of the moral costs and long term destruction of a once-good company.

Anonymous said...

I have been employed by 1/2 dozen companies in my 34 years and have never seen morale as low as it is at CSC. Upper management cares about one thing and one thing only....their COMPENSATION! With the reorganization over a year ago many of us were placed in incorrect functional areas. This directly affected our job titles which directly affected our salary bands. We were told that this would be corrected and we would be placed in the proper functional area. Just today I asked what the status was and was told that our VP choose not to move us to the correct functional area because our utilization numbers were too good and he didn't want to lose them...why? Because it would affect his COMPENSATION!

Anonymous said...

Romil Bahl joins as Executive Vice President and General Manager of Global Industries replacing Jim Cook...

He comes from PRGX, well, I say that, he was fired as CEO in November 2013 and that company is down the shit bin.

Got all the makings of a successful executive that one...

On the other hand, who with any talent would board a burning ship?

Meanwhile in the UK, Sanjiv Gossain takes over from Liz Benison. Sanjiv's main talent appears to be being able to deal with Indian senior management.... hmmm I wonder what this means....

Anonymous said...

It could mean many things, but most likely it's another step in putting an Indian management infrastructure in place in preparation to sell a large chunk of the business to an Indian company. If you look around CSC the same thing has happened. Now don't get me wrong, I have worked with many of our Indian colleagues and have great respect for them, both technically and personally. But as far as the management choices go, it's a puzzle - titles and arrogance seem to be the only requirements, trumping talent and experience.

Anonymous said...

Indeed - they just keep counting that cash and those stock options.

If it makes you feel better, don't worry about those salary bands - you'll never have raises or promotions to exceed the one you're in right now anyway.

Anonymous said...

PRGX global inc. CEO romil Bahl 3 million pay raise while ripping off the employees by 20%

visit: http://www.ripoffreport.com/r/prgx-global-inc/internet/prgx-global-inc-ceo-romil-bahl-3-million-pay-raise-while-ripping-off-the-employees-inter-1007363

Anonymous said...

Anytime somebody who is a President and CEO leaves "effective immediately" then they've been given the boot out the door. And looking at PRGX, masters of "audit analytics", it's obvious why this new clown is qualified to lead a major business unit called "Global Industries".

My bet is that Lawrie hired him for a name, and because he was willing to work cheap as to not upset the cost structure and suck out more money and compensation that surviving senior management can have. I'll bet he works a lot cheaper than Cook did . . .

Anonymous said...

Why care about this guy? I mean, CSC with or without him has treated employees as expendable resources. CSC discriminates and underpays. There are no values, and of course nothing is CLEAR especially when it comes to career progression, opportunities or fair salaries. I don't care if Jim is gone, I don't care about anything related to people that have (and keep) f****up the future and careers of so many people at CSC. If you can leave do now, if you plan to enter think twice!

Anonymous said...

The spinning exit door is rotating faster each week. Fed Gov't customers will continue to feel the pain and (*for the MD/VA/DC area at least), smart recruiters from CSC's competitors will enjoy the bounty of talented, hard-working and underappreciated technical experts who have had enough of the deceit, lip-service and bull***t cover stories.

Anonymous said...

Absolutely. The 2011 Omnibus Incentive Plan, as approved by the Compensation Committee, makes no reference to employees or any human resource factor e.g. staff retention in the establishment of performance goals. Quoted from the originally filed SEC document below:

Performance Awards

Any award available under the 2011 Incentive Plan may be structured as a performance award. Performance awards not intended to qualify as qualified performance-based compensation under Code Section 162(m) will be based on achievement of such goals and will be subject to such terms, conditions and restrictions as the Compensation Committee will determine.

Performance awards granted under the 2011 Incentive Plan that are intended to qualify as qualified performance-based compensation under Code Section 162(m) will be paid, vested or otherwise deliverable solely on account of the attainment of one or more pre-established, objective performance goals established by the Compensation Committee. One or more of such goals may apply to the employee, one or more of our operating units, divisions or sectors, or our entire company, and if so desired by the Compensation Committee, by comparison with a peer group of companies including by direct reference to peers, by reference to an index, or by a similar mechanism. Performance awards may be based on any one or more of the following measures:

● contract awards; ● backlog; ● market share;
● revenue; ● sales; ● days’ sales outstanding;
● overhead; ● other expense management; ● operating income;
● operating income margin; ● earnings (including net ● earnings margin;
earnings, EBT, EBIT and
EBITDA);
● earnings per share; ● cash flow; ● working capital;
● book value per share; ● improvement in capital ● credit rating;
structure;
● return on stockholders’ equity; ● return on investment; ● cash flow return on
investment;
● return on assets; ● total stockholder return; ● economic profit;
● stock price; ● total contract value; or ● annual contract value.




Anonymous said...

And another Indian named as a major player in cyber just now... Coincidence my ass!

Anonymous said...

If CSC turns in good revenue numbers, I am ready to be amazed by the continuing ability of CSC's accountants to make silk purses out of sow's ears.

Anonymous said...
This comment has been removed by a blog administrator.
Anonymous said...

I am getting really worried. I work in the uk. Do people think things will get better or worse in the uk? I am thinking specifically of redundancies - have they now finished?

Anonymous said...

After recent communication from Mr. Maguire, it is pretty evident that Mr. Cook was not 'terminated' but he left on his own. Global Industries is stripped off it's major powers/privileges and new CSC operating model aligns heavily towards the regions headed by Mr. Maguire.

Anonymous said...

What an innovation........a global operating model based on Regions! Back to the future, to the great days when CSC meant "Collection of Small Companies" but was successful?

Anonymous said...

"make silk purses out of sow's ears" . . . that's a good one that I had forgotten about. As past history has demonstrated (in the Nordics regions of Europe, most recently notable) the CSC accounting guys are a barrel of laughs . . . and at least moderately talented at cooking the books (if they were REALLY talented it would take much longer for them to get caught).

Anonymous said...

Was there any information (fact or rumor) about the demise of Tom Hogan? Tom Hogan was Lawrie's cheerleader and presumed heir apparent and then suddenly he vanishes. Never heard anything about the circumstances.

Anonymous said...

No idea why, but looks like Hogan was fired - you don't normally wait from June 2013 til March 2014 with no work unless you are caught on the wrong foot...

Anonymous said...

Lizzy B achieved (at best) 80% of Lawries financial targets. Lets take it as a given that Lawrie is too stubborn to accept that his targets were unrealistic. So ask yourself whether Sanjiv Gossain is immediately going to magic up at least anorher 20% of increased revenue/OI/profit hidden down the back of the UK sofa that LizzyB overlooked, or whether the more likely path to hit Mikeys numbers is yet more cost (ie people) cutting.

Anonymous said...

Interesting to note that TD Ameritrade's Research Team has downgraded CSC stock from "hold" to "reduce" rating over the weekend. I wonder what they know that we don't for them to encourage their investors to start pulling the rip cord and bailing out . . . could be the first tremor of the impending earthquake.

Anonymous said...

The well is indeed running dry in trying to achieve unrealistic financial performance. Giving one more poor slob the ax isn't going to help with the fundamental business problems now squarely on Lawrie's back. I'm giving 5 to 1 odds on more "cost reductions" (i.e., firing more talented and dedicated people globally, not just continuing the slaughter in the U.S.) is the key to artificially making the numbers.

Anonymous said...

An interesting point indeed - Hogan was just another of those who vanished into the night, another victim of the Lawrie style of firing anyone who doesn't agree with him / whacking out another scapegoat to CYA and evidence of his incompetence at building a true management team to develop CSC into a real company instead of a manipulator of numbers.

Anonymous said...

They have just announced 750 job cuts in the UK

Anonymous said...

Hogan quit the day he received his bonus in June 2013 after he found out that Lawrie had reduced Hogan's empire by giving half to Mr. Maquire.

Anonymous said...

This looks like a pay off from CSC to avoid more serious consequences
http://www.4-traders.com/COMPUTER-SCIENCES-CORPORA-12190/news/Computer-Sciences--to-Pay-11-Million-to-Resolve-False-Claims-Act-Allegations-18279433/
Based on what the US attorney said they are getting off light:-
"When defense contractors can enrich themselves at taxpayers' expense by falsely representing that they provided expensive services, the government must be vigilant in pursuing fraudulent claims," said U.S. Attorney Rod J. Rosenstein.

Anonymous said...

quite the game being played on merit increases, or lack thereof. If your pay is at or above industry standard for your recently lowered job classification, you get no increase, regardless of your performance.

Anonymous said...

Hmmm . . . unheard of . . . the sharks eating each other . . . taking their toys and going home because they've been cut short in the Game of Thrones. Evidently Hogan didn't understand that this game is played all over CSC, at all levels. Back biting, professional sabotage, and unethical behavior abound in CSC. Also funny that they have a senior level ethics and compliance office that does nothing but act as a corporate gestapo to put window dressing on for the outside world and to quench the internal efforts of caring employees.

Anonymous said...

My sympathy is with my colleagues - or, ex-colleagues I should say - in the UK. Sadly, I predicted this was the course in other posts in this forum.

And my prediction is that you haven't seen the end of it . . . everybody globally is at risk, whether you're in one of those low labor rate markets or not.

Anonymous said...

Morale low.. who cares. Full of lifers..... they will bleat and moan..and never leave.... what a bunch of wasters

Anonymous said...

Why are we not surprised at this payoff? Finances trump ethics, morals, and legal issues every time, as we have seen in countless previous examples. Not sure if it's innate criminal tendencies or that the performance pressure is pushing those with tenuous ethical anchors over the edge out of fear and intimidation of consequences for not delivering financial performance. Either way, a culture of sick puppies in perpetuity. Who knows how much hasn't been discovered yet?

Anonymous said...

No game - it's very simple - unless you're a Lawrie crony or toady, you don't get a merit increase. Period.

Anonymous said...

that was a really helpful posting - you didn't get the boot at some point by chance?

Anonymous said...

Announced 28th April: Latest round of cuts in the UK - 750 redundancies planned. That's about 10%.

Anonymous said...

The only surprise for the UK is that it was only 10% !

Anonymous said...

I don't think that's 10%, it was about 7000 people in UK&I about 2 years ago... its got to be about 5000 now, so15%

Anonymous said...

The constant chopping of hard working and dedicated people while the morons at the top demand more with less and less resources.. At the current rate of the recent announcement of another 750 redundancies the future is looking very bleak..

Anonymous said...

The other surprise is that today, 04/29/2014, there are 67 vacancies in CSC UK on csc.com.

Anonymous said...

I had heard Hogan was actively trying to purchase CSC prior to Lawrie arriving. The reason Lawrie extended an offer to him is that he knew the company better than any other outsider. Anyone know if there is any truth to this? I had heard it from several sources.

Anonymous said...

Your turn soon :-)

Anonymous said...

Does anyone know if Mark Roman is still employed by CSC and, if not, why not?