Thursday, 12 November 2015

Netcracker to Nutscracker - Ouch!


Ignorance, dishonesty, incompetence or just greed at CSC? - The little boy seems to know.

A few days ago, an article on the website of “The Register” in the UK talked about a fine of $1.35 million which CSC had agreed to pay for using workers without security clearance on a US Department of Defense contract.  CSC paid up but protested its innocence.
The article read as if CSC has overlooked security clearances, had made some administrative error or had failed to follow due process. However the full story, as reported today by Allgov, is far more serious than just administrative oversights. 
We want to underline here that the incidents took place during the tenure of Michael Laphen as CSC’s CEO, before the arrival of Mike Lawrie and the current CSC senior management team.

Here is an extract of what Allgov reported:

Cost-Cutting Contractor Allowed Russian Programmers to Infect Pentagon Computers

A defense contractor working for the Department of Defense handed off part of a communications system upgrade to another company that hired Russian programmers to do the work—and who infected the system with viruses.
The fiasco began in 2008 with Computer Sciences Corporation, which had a $613 million contract with the Defense Information Systems Agency (DISA). The deal involved writing software for sensitive U.S. military communications systems that should have been handled only by U.S. workers with the necessary security clearances. Instead, Computer Sciences Corporation farmed out some of the work to subcontractor Netcracker Technology Corporation, a Massachusetts-based firm that hired programmers in Russia to write code for the project.

Another contractor, John C. Kingsley…..discovered the offshoring and informed Pentagon officials in 2011 what was happening, (warning that)  the Russian-made software made it possible for the Pentagon’s communications systems to be infected with viruses. He said Netcracker used the Russians because they worked for a third of the cost of U.S. programmers.

“On at least one occasion, numerous viruses were loaded onto the DISA network as a result of code written by the Russian programmers and installed on servers in the DISA secure system,” Kingsley said.

The US Justice Department still may pursue criminal charges against the companies.

(End of quote; Full details on

It almost defies belief that CSC could have farmed out this work to a company which then subcontracted to Russians. Why did CSC do this? What would cause somebody to potentially compromise the national security of their own country? Was it sloppiness? Was it incompetence? Was it the pressure to “make the numbers” at whatever cost?  Or was it simply greed, an opportunity to increase profits and thus increase management bonuses?

This is another unsavoury episode from the Laphen era, to put alongside massive write-offs, shareholder lawsuits, SEC 
investigations, customer disputes, accounting irregularities in many countries, flights of rendition, and the UK NHS fiasco.


The US Department of Justice is considering criminal charges against the company. This is unfortunate as it may just lead to another massive fine to be borne by the current shareholders.
We would much prefer to see criminal charges brought personally against the senior CSC executives who were responsible for running the company,  starting with Michael Laphen, those who were responsible for this particular business, and those who collected bonuses from the profits it yielded. Will they once more claim ignorance and incompetence,  saying they were totally unaware of the problem, as in the shareholder class action lawsuits arising from NHS?
How can it be that nothing of these events came to light until a whistleblower informed the Department of Justice in 2011?  How can one believe that nobody in CSC ever knew about it? Was nobody in CSC overseeing what Nutcracker was doing?
What about CSC’s non-executive directors of the time, who were being very well paid indeed to ensure oversight over the running of the company. Where were they when all this was happening? How about charges being brought against them for negligence?
Finally, what about the customers in all this?  If CSC does not pay sufficient attention to critical elements of national security, if nobody in CSC management sees major problems  (or sees them, but  keeps quiet about it) then how much trust can anybody put in CSC?


As the holiday season is near book your tickets for a Nutcracker at your local theatre. Seeing this fairytale will be more fun than worrying about the CSC hours story.



by Littlejohn 

56 comments:

Anonymous said...

to my knowledge this is still an active investigation: http://www.bizjournals.com/newyork/blog/techflash/2014/10/feds-accuse-nyc-computer-sciences-corp-of-massive.html
What's intriguing in all this is the knee jerk reactions you hear from corporate defenders that this is just the norm and cost of doing business in certain political environments. Seems like CSC and controversy are inseparable bed partners.
Oh! This latest is under the current CSC big wig umbrella.

Anonymous said...

Will the possibility of criminal charges impact the stock market floatation of CSRA on November 30?
Which former CSC company could face the possible criminal charges? CSC commercial as the historic company or CSRA as the successor of CSC North American Public Sector which was the business involved in these events?
Will CSC commercial indemnify CSRA against the outcome of any legal proceedings ? If not, will the risk of criminal charges against CSRA and a potentially heavy fine affect its initial share price? If so, by how much? Will potential investors hold back from CSRA until this risk is removed? CSC has lined up a number of investors for CSRA. Were these potential investors told of this possibility of criminal charges? If not, what will they think and do?

This is a situation Mike Lawrie could have done without,just 2 weeks before the launch of CSRA.

I agree with the contention that criminal charges should be brought not against either CSC successor company, but against Michael W Laphen and the CSC executives who knew, or should have made it their business to know, what was happening with Nutcracker back in 2008.

Anonymous said...

I was wondering why there was no action on Cassandra for such a long time. I even thought Cassandra has become one of most recent CSC acquisitions :). This post changes that a bit.. ha ha.

Anonymous said...

4 days without a post . . . .
Well I think as a recently ex-CSCer in the UK (the amount of good people that have been let go is comical really) why doesn't fat Mike just go rather than boring everyone with his jargon to "simplify" all the good things he introduced??
CSC used to be known as a "Collection of Small Companies" now its more likely to be lots of small separate companies

Anonymous said...

More redundancies/layoffs announced due to the split of the company, whilst being told those that remain will be expected to absorb the additional work into their work. Not enough resources to do the current work. Colleagues with large number of years under their belt in the UK just waiting to be made an offer to go. They just come in and do their 7.5 hrs and go. Employee moral/engagement at all time low, despite what senior management think! Line managers will now have 10 people to manage instead of the 5 that was agreed last year due to lay offs and of course whilst CSC talks the talk it never allows line managers time to do line management, it farcical and does not change. CSC are using more and more off shore labour to work on contracts. Mid term appraisals nothing more than making sure KRA's entered into a system and are of no benefit to anyone. Totally agree with other postings on here, how come those involved in all these criminal/fraudulent activities don't end up in prison, oh of course CSC just pays over the money when caught!!

Anonymous said...

This company is rotten to its core.

Especially fat cat middle and upper management.

Anonymous said...

Jana Partners this week sold almost half of its stake in CSC.

After that sale it owns just over 4% of the company.

I wonder what made them sell so much this week? A belief that CSC stock has reached its peak??

Anonymous said...

Yes, it does seem like they have dumped almost half... which is odd because I thought that you needed to be still holding the stock at the end of this month to get the split?

Maybe they just wanted the 10.5 per share (which I think they did get) or more likely are hedging their bets with some just getting the 10.5 and others trying out for a rise post-split.

I suspect that both companies will tank next month - simply because of all of the carpet baggers who will unload ASAP.

Anonymous said...

Computer Sciences' (NYSE:CSC) U.S. public sector arm CSRA, will take CSC's current spot in the S&P 500 following Friday's close, at which time CSC's breakup into a U.S. public sector firm and a commercial IT firm goes into effect.

The commercial IT arm, which will retain CSC's name and ticker, will replace Apollo Education (NASDAQ:APOL) in the S&P MidCap 400.

So the acronym CSC will no longer mean "Collection of Small Companies". It will mean "Collapsed Small Company"

Anonymous said...

I always thought it meant Cannot Satisfy Customer....

Anonymous said...

no. date of record was 11/18. No need to hold the stock after that date.
Research yourself before taking my word though.

Anonymous said...

18 Nov 09:55... you all had midterm appraisals? Wow - someone actually following company policy even though nothing more than checking a box. Amazing.

I haven't talked to the manager who does my appraisals since March because he/she has moved on to another team, although administratively, he/she does all of my personnel related items like appraisals. And I probably won't talk to him/her until appraisal time next year, because since he/she is on another client and doesn't give a rat's behind about the ones he/she bailed out on.

Anonymous said...

If I could be bothered trolling, you lot would be fair game...

Anonymous said...

They say people look back at the past with rose tinted spectacles - but its true with CSC, it only gets worse. Get the experience, make good friends and move on. There are some good and even a few great companies out there which will appreciate the experience ex-CSC staff have to offer. I just think of it as a stepping stone now and can't wait to leave. I imagine a few deluded souls left at the end (we all know a few) looking round and saying "where's everyone gone then ?"

Anonymous said...

Its Black Friday, I wonder if that is significant???

Anonymous said...

Nice photo of the gang ringing the bell at the NYSE, shame Lawrie couldn't be bothered to wear a tie, you'd think he'd be able to afford one!

Anonymous said...

While they ring the bell, the CSC regions are frantically trying to fill in-Q3 revenue and FY revenue / OI gaps against "budget" plans set unrealistically high so that variable pay outs do not happen while they are incentivized at EPS/share price. Of course paired with the usual mindless and illogical cost take outs related to travel, etc. So lots of financial engineering and number stripping.

Anonymous said...

That cannot surprise you, its the same thing that has happened every quarter for the past 5 years, broken record yes, but a broken company falling apart bit by bit

Anonymous said...

Did the stock just tank? 55% loss? Glad I jumped just after the date of record on 11/18. I think I just saved myself a huge loss, and still get the $10 dividend. Why the hell was the market so slow in adjusting? This should have happened prior to 11/18.

Anonymous said...

gotcha. It essentially split between CSC and CSRA and lost the value of the $10 dividend.

Anonymous said...

The share price essentially halved - CSC is just over $30 a share now, CSRA is about $30 also. The $10 was a special dividend and shouldn't impact share price. It will be interesting to see what happens with both share prices over the coming weeks

Anonymous said...

No, it did not tank: It's the impact of the split off of CSRA:

It will tank sooner or later, just not today:

Anonymous said...

Reading around all of the financial opinions, it would seem that the market is rather keen on the CSRA business and that federal business is still perceived as money for old rope. There are high expectations for the high growth federal business.

Far from being one third of the value of the company, it would seem that with SRA its now actually more than half of the value.

Which begs the question... why on earth did CSC dump it?

The obvious answer of course is that the financial pirates forced this move despite it not being in the best interests of the company.

Indeed what actually seems to have happened is that CSC is the bit that was dumped. The sad sorry bit that still has the utterly clueless Mikey at the helm and not a single good idea except "lets have another re-org and lay some more people off".

Anonymous said...

CSC buying Xchanging.

For the staff - from someone who knows... this is a bad move for you. You may think your own company bad... wait until this lot take you over. First year will be ok due to contract agreements... then you will be canon fodder to the CSC masses....

You will meet CSC employees who will be the positive face of the company, service execs who only want commission for new business, account execs .... maybe a few brain washed techies.

Also your managers who promote this takeover, they will be snout in the bigger trough they can get from CSC.

Good luck.

You all need it.
ps
HR rubbish as well.... once taken over you will not see them until the redundancies start. That will be all done over conference calls.

Anonymous said...

To 1 December 09.25

Sorry, but I disagree entirely. The spin off of CSRA is maybe the best thing Lawrie has done since he joined CSC.

I previously worked for an IT company not unlike "pre-split" CSC. It had one division which was considered unglamorous, but which had low, but steady revenue growth and made profit. It also had two more glamorous divisions which had a great future....at least according to the CEO.... but which made losses: The two glamorous divisions ended up killing the one profitable division, which had to lay people off "for the Corporate good" and whose profits were used not for re-investment, but to absorb the other divisions' losses. Eventually the whole company died, as the profitable part of the business had been choked.

This is where CSRA or former NPS if you prefer, was heading: This was where CSC in total was heading:

By splitting the two, Mike Lawrie has saved CSRA by detaching it from the rest of CSC, which is heading for extinction: He has given this mainstream, or commercial, CSC a chance for some kind of future. It can now be acquired by anybody because the concern of the US Govt about a "foreign company" providing its IT services has been removed by the split.

Mike Lawrie has done many things wrong at CSC and has destroyed too many people's careers: But he got this one right.

Anonymous said...

It's quite probable that there is already a half baked deal in the wings. My guess is CSC will be swallowed by HCL in the next 6 months. Plus, of course, there will be more transformation reductions...

Anonymous said...

HCL glassdoor “Stay away from them if you can ”

Current Employee - Anonymous Employee in London, England
Doesn't Recommend
Negative Outlook
Disapproves of CEO
I have been working at HCL Technologies full-time
Pros
Good presence in Infrastructure world Global clients across Some of the business units is good
Cons
No career progression No salary hike Minimum bonus
Advice to Management
There is no Management to talk to.. they just want to do what they want to.

CSC and HCL sound like a good fit..

Anonymous said...

Well one more in my unit leaving by own accord... and i'm looking at a new job too. - Don't think i'll stay and wait for a redundancy, if a company like HCL will buy CSC.

Anonymous said...

I agree with you, however, CSC commercial U.S. still works for the U.S. clients that are relevant for the USG and critical U.S. infrastructure, so concerns from the USG could still arise if a firm takes over. Its still possible to create further JVs such as the one with HCL for banking. The acquistion of UCX and others shows that there are activities to add/grow clients/market access, skills, IP and revenue in growth markets. CSC will not be able to grow organically as its internal processes have never been fixed and growth would take years given the competition everywhere. HCL could be a good fit but so could others just add CSC, the clients etc. and further consolidate in the market. Debts have to be shouldered though. Capgemini, Accenture, HP,...

Anonymous said...

I've long thought a HCL takeover was on the cards. There's an interesting article here though:

http://www.bloomberg.com/gadfly/articles/2015-11-30/computer-sciences-takeover-more-likely-after-spinoff?cmpid=yhoo.headline

If not HCL, then somebody else - CSC is now a bite sized morsel for someone.

Would it be a disaster? Well, based on what I've seen of the JV currently, yes.

On the other hand, its probably the only route left given that the family silver is gone now, its time for Mikey to take his handbag down to the docks.

Anonymous said...

CSRA - and CSC now the poor relative....

EU wanted away from USA CSC. UK wanted away from EU.

Now the cash cow in USA not going to prop up EU e.g. Denmark.. the state of that outfit means never made a profit...

The real bloodbath will be starting soon in UK and EU... and rest of the world.

Lawrie pulled a sweet one - and will now become USA only focused, sit back and relax now. Then he will get headhunted for a true blue chip like IBM, Msoft etc......

How ironic that CSC and in particular UK has bent over backwards for offshoring... lets see how these companies treat UK employees when India becomes the paymasters....

Anonymous said...

CSC UK - many senior managers on 100k+++ many on 120-150k range and woking with them you would never know it. Then add pension, company car and bonus - for what they do very very expensive.

The new owner when turns up will not put up with this snouts in the pigs trough and people protected by mates who they go cycling with. We all know what happened to the CSC sham of a cycle team.

Roll on 2016.

Anonymous said...

Two days in and the screwing is royal with the release of the new PTO plan for CSRA. Currently there are two weeks sick time plus three levels of vacation:

1-5 years, 2 weeks
5-15 years, 3 weeks
15+ years, 4 weeks

Under the new PTO plan, there will be two levels with no sick or vacation distinction:

1-5 years, 3 weeks
5+ years, 4 weeks

So on day two of the CSRA regime, the true colors are already beginning to show as things are taken away with the longest serving employees taking it hardest in the shorts. Can't wait for day three's surprise.

Anonymous said...

Day three surprise would be the christmas stingies at CSC paying for an xmas party...

Xchanging - did you know all scrapped in CSC UK about 15 years ago!!! Any event - self funded. enjoy.

Anonymous said...

I left CSC-UK last year. Now on 92k + BENS. and so far 2 XMAS parties already this year !!
I feel sorry for the people still behind. I just hope the ones who were holding out for redundancy cheques get what they expect.

Anonymous said...

2 years ago... every year summer ball and christmas party.

Free drinks all night, food and entertainment.

Now what was that word.. hmmmmm.... recognition and way of saying thank you for your effort throughout the year..... not something heard often at CSC unless verbally from manager playing the sympathy card as can never back anything up with anything of worth.

Anonymous said...

Some teams had fun events two years ago? I think the last time we had one (in the Austin area), that the company paid for, was about ten years ago.

Recognition for a job well done? The only recognition we get on our team for a job well done, is more work expected.

A manager saying "Thank you" usually comes at the front of a discussion and is followed in the same conversation with a request to "do more".

True story - happened just a few weeks ago. My manager called me and started the conversation with a "I wanted to say thank you to you for the job you did on the project that just went in last weekend". My wife was listening to the call and she gave me a thumbs up and mouthed to me... "Say thank you". I mouthed back "just wait"... and sure enough, three minutes later I was being asked to cancel my vacation request for the holidays.

Nothing good comes from management, without an offset by something more.

Anonymous said...

Well, since it is happening to CSRA, I would expect it to happen with the other half shortly.

Reduce the most senior resources benefits has one goal in mind. Get rid of the higher paid employees and replace them with lower paid, new employees. It's great for the bottom line.

Of course, while it may be great for the bottom line, it leaves CSC/CSRA with no experience and results in putting out a poor product. That results in customers leaving. But on the bright side - if the bottom line improves at every quarter based on reduced employee costs, the high muckety-mucks get wonderful no-cost stock options and millions upon millions of dollars worth of bonuses.

Everyone wins - as long as everyone are the most senior people within the company(ies) - which we have seen in the past few years is all that matter.

Anonymous said...

You seem to have forgotten the free mince pie that was given to all UK employees last year!!
My new employer has arranged a team dinner for Christmas - free food and bar all night! Oh and mince pies!

Anonymous said...

Don't forget CSC is generously giving 2 x US$10,000 to two charities for Xmas.

That's a $US20k tax write off (so effectively free) and not even $0.50 per employee.

I think even Scrooge would be shocked.

Anonymous said...

And what about the XMAS bonus? ............................................

Anonymous said...

LAWRIE JOHN M, a President and CEO at Computer Sciences Corporation (NYSE:CSC) has sold 16,379 shares at $30.55 per share to trim the total holding at 334,885 shares.

Maybe he will use the proceeds to fund Employees Xmas parties???

The price may seem low, but bear in mind this are just his CSC shares, not his CSRA holding.

Anonymous said...

The price isn't low. You have to keep in mind, that by the spin-off the value of the share was splitted and he will receive 16,379 + 334,885 shares of CSRA plus 10$ for each (single) share. So by just performing the split, he received apx. 3.5M$ cash. So he earned within a few days 4M$.

Anonymous said...

Anyone remember the 4 chocolates, (yes 4!)sent through the post a few years back ? I was overwhelmed by managements generosity !

Anonymous said...

CSC buys UK company Xchanging... another 8000 souls cast adrift in the turbulent seas with little chance of rescue.

Anonymous said...

Lots of contradictory messages and information in circulation. Clearly the Paid Time Off (PTO) policy effective the first of the upcoming year is a serious blow to the employee who has a history with CSC. A good strategy perhaps to encourage older workers to vacate the company. Additionally, thinking is still in place that CSRA itself might get carved and sold out to interested suitors.

Anonymous said...

CSRA will be in for a hard time regardless of cut ups. Its a merger and there will be plenty of blood on the deck before that calms down.

Anonymous said...

Hard not to draw comparison between Hilcorp and CSRA at least in terms of polarities. Admittedly what the ceo did for the Hilcorp workers represents an extraordinary act. CSRA workers--particularly the older lot--are taking a shellacking. But do these acts and policies really surprise anyone given the history of the corporate decision makers?

Anonymous said...

Xchanging... at least Capita a company on the up and not having redundancies after redundancies.. if your board / share holders accept the offer.. they have no respect and do not care for xchanging staff... your just a commodity/resource :-)

Anonymous said...

https://finance.yahoo.com/news/weakness-seen-computer-sciences-corp-135801639.html

Anonymous said...

This is Zacks. Fools! They are comparing pre-split CSC (incl CSRA) earnings with post split CSC earnings, which excludes CSRA. Just shows that some analysts never lift their heads from their spreadsheets to see if there is a world outside their offices.

I agree with their Sell rating, though, but for different reasons

Anonymous said...

That rubbish is all auto generated. There's a few other similar auto-spam financial web sites with similar junk. Its just about driving clicks to their website, not serious financial advice.

If you work for CSC, you can see enough without needing financial advice anyway.

Anonymous said...

hmm.. will the low share price end in another layoff again? - Or will CSC be bought by another company and cut into smaller bits? The future seem very dark... unless you happen to be in top management.

Anonymous said...

Blimey at last a financial analyst with a brain - perhaps now CSC will go the way it should - down the drain.

Anonymous said...

So... looks like Mikey is now the Chairman of the Board for CSC. And a couple of new board members - at least one more from his old haunts IBM. I guess they needed to find a way to slip him a few more FREE shares. They have to make up somehow for the downward spiral on the stock prices for CSRA. Hoping we get sold off soon. We need some light at the end of the tunnel.

Anonymous said...

Well, times changing even more this early spring !
CSC's global partner HCL now gets benefits from knowing CSC from inside: Alstom outsources IT transformation to HCL Technologies, according to article Jan. 25, 2016 in computerweekly.com
Also, the major long time CSC client RSA (Royal Sun Alliance), goes with WiPro for IaaS solutions across Europe, according to same source Feb. 4, 2016.
Is the partners of CSC, cannibalizing CSC ?