CSC’s announcement of its Q3 FY2017 results this week was a “no surprise” event. Which is what we expected.
Revenue for the quarter, at $1.9bn, was up 14% from Q3 FY2016 thanks to the inclusion of the XChanging and UXC revenue. Non-GAAP EPS was $0.81, some $0.11 above analyst expectations. GAAP EPS was $0.20, but nobody seems too worried about that. Bookings were $2.4bn or 1.3x revenue. Next Gen revenue was up 60% year-on-year. All told, these are respectable financial results. On a geographic basis, the performance was also healthy, but Mike Lawrie made a point of mentioning that UK was the only area to suffer a constant currency revenue decline year-on-year. This not does bode well for CSC UK employees!
The analyst questions focused far more on the merger with HPE Services than on the past quarter’s results. Mike Lawrie reported that the merger plans were progressing well, threw in a few anecdotes and specifics and everyone seemed happy. He sensibly dodged the questions on the potential impact of the Trump Presidency by saying it was too early to tell.
CSC–HPE Newco top management has been identified and today the composition of its Board of Directors was announced. We are dismayed that Mike Lawrie has been named Chairman, President and CEO. It is poor Corporate governance to have one executive holdings these 3 roles. How quickly CSC has forgotten the dramatic consequences of the last time one executive held all three roles! There was a good reason to split the roles within CSC just before Mike Lawrie joined. The reason is still valid today, irrespective of the name of the jobholder. We hope that Meg Whitman and the other non-executive directors will show the determination and cojones to provide real oversight and challenge Lawrie as needed in order to offset this concentration of power in one man.
So CSC successfully moved a step closer to its merger with HPE and to another massive payday for Mike Lawrie.