Friday, 3 October 2014

Living in a dream world


WatchList News today reported that:
Computer Sciences (NYSE:CSC) was upgraded by equities researchers at Morgan Stanley from an “underweight” rating to an “outperform” rating in a research report issued on Wednesday. The firm currently has a $60.00 price target on the stock. Morgan Stanley’s price objective would suggest a potential upside of 1.71% from the company’s current price.
The analysts wrote, “The Bloomberg article indicated that CSC contacted Blackstone and Bain Capital regarding a potential LBO. The company has taken similar action previously, but now there is a new management team. As we’ve written before, investors are still waiting to see evidence of execution with a number of metrics indicating a declining platform rather than a recovering one. Cash flow yield and low leverage have CSC screening well but a buyout at this point would likely require a potential buyer to reward current investors for execution yet to come. CSC management has not publicly commented on the possibility of an LBO.”
Other equities research analysts have also recently issued reports about the stock. Analysts at Raymond James upgraded shares of Computer Sciences from a “market perform” rating to an “outperform” rating in a research note on Tuesday. They now have a $75.00 price target on the stock. Separately, analysts at Goldman Sachs initiated coverage on shares of Computer Sciences in a research note on Monday. They set a “buy” rating and a $72.00 price target on the stock. Finally, analysts at Zacks reiterated a “neutral” rating on shares of Computer Sciences in a research note on Thursday, September 11th. They now have a $63.00 price target on the stock. Ten equities research analysts have rated the stock with a hold rating and six have issued a buy rating to the stock. Computer Sciences has a consensus rating of “Hold” and a consensus price target of $65.50. (End quote)


Some of these analysts are in a spreadsheet-induced dreamworld.  A story comes that CSC is trying to find a buyer and, bang, analysts upgrade their outlook and target price for CSC stock. Raymond James and Goldman Sachs rate CSC as “outperform” or “buy” with target prices of $72 and $75.  Based on what?  An in-house analytical spreadsheet model?  We do not think it is based on the analysts going out and speaking to customers, competitors or employees, nor on revenue levels nor on business won.

I would not like to have bought any CSC shares at $75!


The Caterpillar was the first to speak.
`What size do you want to be?' it asked.
`Oh, I'm not particular as to size,' Alice hastily replied; `only one doesn't like changing so often, you know.'


38 comments:

Anonymous said...

Watchlist is reporting an upgrade that did not happen at Morgan Stanley. Rather, Morgan Stanley reiterated their Underweight rating on CSC which makes far more sense with the accompanying quote about the metrics indicating decline.

https://finance.yahoo.com/news/morgan-stanley-reiterates-computer-sciences-131527483.html

Anonymous said...

Unfortunately, CSC outperforms as a liar corporation. People inside knew that since cut numbers were poor and disappointing, the guy with a fake smile would have to make his magic to keep the orchestra playing. His move was to deceive people in believing that CSC is about to be sold to one of those dark billionaire groups that live in the shadow to delight conspiracy theorists about a new world order Illuminati. It is a clever move, but as other lies, it will only last until the next financial cut. Meanwhile, to make some extra millions, he will continue pushing on the employee headcount reduction strategy. The one and only strategy in his head.

Anonymous said...

Love it when these pompous incompetent morons make these proclamations. Ignorant "news" release with ratings upgrade, followed immediately by price spike, followed immediately by me buying put options, followed next day by price drop back to where it was, followed immediately by me taking a profit on the options. Ht the sweet spot twice on the same cycle this go around, so keep it up, Mikey! Making more money now from CSC than I did as an employee.

Anonymous said...

Do an LBO then split up the company just like HP plans to do. NPS to some U.S. player (GD, LMC, NG, SAIC). Within NPS, further business units could be spun off to other players on the market. The rest of the commercial / next gen IT business goes to the Indian likes of HCL, WiPro which could get immediate access to a lot of markets/clients instead of the usual suspects HP, IBM.... If Blackstone and company take CSC private and load up debt, there will be more restructuring and cost cutting...

Anonymous said...

One wonders too if the HP split provides added momentum to CSC's upper echelon to expedite a sell. Clearly, the changes imposed on CSC staff come with damaging consequences, the most obvious being loss of intellectual capital. Lawrie may be reaching the point at which he either effects a sale or risks serious corporate damage with further loss or lowering of revenue expectations and concomitant loss of employee talent. CSC is becoming known as a great talent pool from which competitors can tap.

Anonymous said...

Mikey poked some holes in the dam to get talent to flow out in the name of cost cutting. Bad news is, he's poked so many holes that he can't plug them back up. People, good people, are jumping ship in droves. Intellectual capital developed over years of dedication in markets where CSC used to be strong is vanishing, not to be replaced. There are many instances where the cuts and abandon ship are so bad that CSC can no longer service their existing contracts . . . and even if you get people who haven't heard the word on the street to board the sinking ship, you can't replace 20 years' experience with 25 year old fresh out of college or from India. Offshore is low cost, and no offense, but the culture and industry knowledge don't fit in every market - no offense intended to my many esteemed colleagues.

Anonymous said...

Selling CSC is a good news. Current management will not fix the basics.

Anonymous said...

I hope the optimism apparent in the earlier comment is correct, as the speculation regarding a sale is continuing and seems increasingly credible: "Computer Sciences Better With Age for LBO Firms: Real M&A"

http://www.bloomberg.com/news/2014-10-10/computer-sciences-better-with-age-for-lbo-firms-real-m-a.html?cmpid=yhoo

Anonymous said...

An interesting quote from an analyst in the Bloomberg link referred to by 20:32

"The logic for the LBO in 2006 is still here today. The big difference though is that the quality of the business is much better following this restructuring.”

The quality of CSC's business is much better today than in 2006? I think not. I do not believe long-term customers or employees would agree either.

But if you are in an office in New York spending your days looking at spreadsheet multiples it might appear that way.

Anonymous said...

Is the LBO rumour over or not...

These guys can't seemingly decide it seems:

http://www.bizjournals.com/washington/blog/fedbiz_daily/2014/10/why-havent-reports-of-apotential-csc-buyout.html?page=all

Anonymous said...

Very true...If you're still here with CSC, stand by for heavy rolls.

Anonymous said...

Game Over Man!!! Game Over!!!

Anonymous said...

Wrong, CSC in its current state IS making money, nowhere near as much as they would like to be, but they are!! its not game over. Not getting a sale, or not getting their preferred terms simple mean that we may all be split up, cut some more and the leadership team who are on incentives to sell will get a lot less money.

If CSC cannot sale, i reiterate, its NOT game over for anybody.

Anonymous said...

Could IBM's big announcement be that it is buying CSC?

Anonymous said...

It wasn't. As one analyst has said, IBM needs revenue growth. CSC won't provide that to IBM or anyone. Why buy air when you can pick off the customers without paying a stock premium?

Anonymous said...

Has CSC stopped being profitable in the past few years or just made lesser profits than it would like? Either way the staff remaining with the company have seen precious little by way of reward and I dare say that situation will remain so long as Mike keeps taking his huge wedge and bonus.

Anonymous said...

Big news today: Global Sales organization eliminated and its head, John Maguire, bounced out of CSC. Smilin' Dave Zolet moved from NPS to take over commercial and earn his $75,000 raise outsourcing the bejeezus out of the division. Larry Prior moved up to fill Zolet's spot in NPS. Hmm.

Anonymous said...

This just in.... IBM with a big miss, and abandons its 5-year plan for $20 in earnings by 2015.

Anonymous said...

Casandra - good story here on CSC ethics http://www.marketwatch.com/story/bizcloudr-files-trademark-infringement-lawsuit-against-csc-att-cisco-systems-vmware-and-emc-2014-01-13

Anonymous said...

About time. The man was useless. A Saleforce CRM freak and nothing else.

Anonymous said...

IBM wouldn't buy CSC. IBM has (similar) problems of it's own. Two stones would sink quicker than one.

Anonymous said...

Right, that's it. I'm changing my name to Dilbert. The Global Position Tracker is now live. I kid you not. No, nothing to do with GPS or GLONASS. GPT, as it's known, is used to somehow track your career. Not sure if you can see other peoples careers in a graphical mosaic of comparitive nonsense, cos I have absolutely no intention of even looking. I might get depressed or something.

Anonymous said...

Why Delay Quarter 2 results to Jan 2015 ? I suspect that CSC is working a deal to be put in place before end of 2014. Wait and see what happens the fun times are upon us.

Anonymous said...

McGuire going is a sure sign that the next quarterly financials are going to be bad. Firing McGuire will allow Lawrie to say on the next quarterly analyst call that he has fixed the problem and pull the wool over the analysts' eyes yet again.

Anonymous said...

Otr results ... bottom line will be OK as all the Regions dumped 3 years of balance sheet items (based on Paul S request)... not want to be in Finance when SEC start looking .....

Anonymous said...

Old news... https://www.bizcloudnetwork.com/csc-trademark-lawsuit/

Doesn't appear to be any attempt to retract from that confrontation by CSC, I guess the gears of justice will grind on for years before that's settled... presumably past the point at which Mikey cares...

Anonymous said...

Where did you read that? I've not seen that...

Anonymous said...

Standard MO in any organisation, fail to sell has to be caused by the sales director not that the market is tough or that the product is shit.

Anonymous said...

non-GAAP methods are all the rage in the staggering tech sector. Got to find something to put a positive spin on flat revenues, Wall Street demands growth even when its plainly obvious growth isn't actually happening, just businesses moving the deckchairs around on the deck of the Titanic.

Anonymous said...

The IBM Illusion... the same illusion Mikey learned to do while he was big blue:

http://blog.commonwealth.com/independent-market-observer/ibm’s-woes-highlight-a-major-risk-to-the-market

And I quote:

" management decided that, on balance, it was better to buy back company shares than to invest in growing the business—not a good sign for the future.

IBM isn’t the only company where this is true; many have the same issues. As the narrative shifts, we may have hit the end of the runway for financial engineering strategies to lift share prices. Actually having to grow business in order to boost share prices is a much bigger challenge for companies than writing a check for stock buybacks. It also makes it much harder to meet market expectations for earnings increases."

Anonymous said...

Another article, another CSC parallel, another warning that buybacks are bad news:

"Wall-Street wisdom is that a high EPS and increasing EPS is a positive indication for future prospects of a company, which is exactly what IBM provides on the surface level. However, burning through all that cash to achieve that goal is just not worth it. To add insult to injury, buybacks have historically occurred when shares trade at high levels. Weakening the balance sheet in an attempt increase value hurts shareholders. The cash would be better off spent hiring more employees, on R&D, and other future needs."

http://seekingalpha.com/article/2586775-ibm-dont-fall-for-the-illusion?uprof=46&dr=1

This is all heading in the same direction, the market is jammed full of clowns all trying the same thing... bubble bursting time is only around the corner...

Anonymous said...

Mike Lawrie hired him (and several others since fired). What does that say about Mikeys judgement...

Anonymous said...

... or the CEO's expectations are wholly unrealistic

Anonymous said...

Where is Ian Miller (GIS UK Lead), I believe he reported to Gary Budzinski? He only joined CSC in March or April this year.

Todays SoS email states that Gossain is now acting GIS Lead.

Anonymous said...

http://www.bbc.co.uk/news/uk-england-cambridgeshire-29777262 £200million.. at least got something that works.

CSC NHS contracts cost UK taxpayers $billions - and for what?

Anonymous said...

Marussia F1 who CSC used to sponsor and provide track side IT engineers gone into administration.

Team was arrogant... goal was always podium finish russian grand prix and that did not happen!

Seems anything CSC touches goes bad.. maybe CSC people rotten at all levels.

Anonymous said...

Bad to worse...

United States vs New York City & CSC in big old Medicaid fraud:

http://finance.yahoo.com/news/u-sues-nyc-computer-sciences-203607191.html

Anonymous said...

While I'm as deeply cynical about all things CSC as most people, I dont think you can really blame 2 CSC IT geeks for the failings of the Marussia F1 team.
(CSC havent sponsored them for a while either).