CSC, facing tougher times, brings in new CFO
By Marjorie Censer,
Officials at Falls Church-based Computer Sciences Corp., recording a loss of more than $4.2 billion in fiscal 2012, last week said they are making significant changes to turn around the troubled business.
In a call with investors last week, Mike Lawrie, the company’s new chief executive, said CSC plans to remove $1 billion in costs and expenses over the next 12 to 18 months. Lawrie said those costs will primarily be administrative, and while much of it will be delivered to the bottom line, some will be reinvested.
Additionally, the company has taken a closer look at its portfolio and identified troubled contracts that need fixes, set up a new management compensation program to better link pay with company profitability and begun weighing “non-core assets” it could sell, Lawrie said.
He said CSC will shift from operating as a holding company — where problems don’t surface to the management level until they’ve escalated — to an operating company that sees anticipated results “and tries to change the outcome through management actions and other disciplined processes.”
Lawrie was upfront about the company’s dismal year. CSC, which does work in the government and commercial sectors, reported last week that its revenue for the year ended March 30 dropped about 1 percent to $15.9 billion. The company also failed to turn a profit, losing $4.2 billion ($27.37 a share), down significantly from the $740 million ($4.73) in profit it posted a year earlier.
The company attributed the loss to write-offs related to a contract with the United Kingdom’s National Health Service as well as impairment and restructuring charges related to troubled contracts within CSC’s managed services unit, which takes over business and technology functions for its clients.
“Our results are very poor, and they are unacceptable,” Lawrie told investors. “We are taking immediate actions to begin to move in a different direction.”
Lawrie, who joined CSC in March, previously led Misys, which provides IT to the banking industry, and spent 27 years at IBM.
Last week, CSC announced its latest leadership change in Paul N. Saleh, who is set to start as vice president and chief financial officer this week.
Saleh, formerly CFO at Gannett, Nextel and Walt Disney Communications, succeeds Michael J. Mancuso.
Lawrie said in his call with investors last week that he expects to announce more management appointments in the coming weeks.
“There is a lot of change,” he told investors. “My calculus is given these results, I think we have to make those changes. I think it’s imperative.”
David Grossman, managing director at Stifel Nicolaus, which has a business relationship with CSC, said Lawrie has identified the company’s structural issues.
“The next thing is doing something about them,” Grossman said. “What it really comes down to from here is, can he execute?”