Computer Sciences Corp. reported a US$1.39 billion loss for its third fiscal quarter, with revenue down 5.8 percent year on year. Performance was dragged down by a $1.49 billion charge related to the U.K. government's cancellation of a health IT contract, it said Wednesday.
The company posted a profit of $242 million in the same quarter last year. CSC said it would have made a profit on steady revenue in the most recent quarter if it weren't for the charge, which it announced in December. Two of CSC's last four quarters have been blighted by exceptional charges, totaling around a quarter's worth of revenue.
Revenue for the third fiscal quarter totaled $3.76 billion, down 5.8 percent from $4 billion a year earlier. The managed services sector continued to contribute the largest share of that, around 44 percent, with the North American public sector contributing 37 percent and business solutions and services 20 percent.
New business awards during the quarter totaled $4.1 billion, and CSC expressed optimism about its ability to capture new business.
The company also named a new CEO, Mike Lawrie, to replace Michael Laphen, who resigned in October.
During a conference call later Wednesday, CSC CFO Michael Mancuso announced that he, too, planned to step down, but would stay on until May in order to assure a smooth transition. Mancuso characterized the move as something long in the works, saying that after taking the job in 2008 he always intended to stay for only three to four years.
Meanwhile, Lawrie's hiring "bodes well for the future of the company," Mancuso said.
Lawrie's "in-depth experience with IBM" as well as his current role as CEO of IT services firm Misys means "he brings the depth and breadth that we were looking for to move into this slot," Laphen said. "CSC has had challenges recently but we have a strong business supported by world-class customers."
There was bad news Wednesday for CSC's Danish business unit: Its biggest private-sector customer there, mobile telecommunications operator TDC, has chosen the Indian company Tata Consultancy Services run its IT services, Computerworld Denmark reported Wednesday.
The company declined to comment further on the outlook for future quarters pending the outcome of negotiations with the U.K. government over the health IT contract. In December, CSC estimated its investment to date in the contract for the U.K. National Health Service at around $1.5 billion, and said it could end up assuming additional costs, pending the outcome of the negotiations.
CSC officials "remain in discussions with UK officials to find a satisfactory way forward," Laphen said during the conference call. "We've been engaged in the discussions for some time. These have evolved into a potential go-forward framework that is currently in the government's review process." He declined to predict when the talks might bring about a resolution.
Other clouds hang over the company's figures. In October it announced that its Danish business unit was the focus of an investigation by the U.S. Securities and Exchange Commission into alleged stock manipulation through fraudulent financial reporting. By November, the investigation had spread to Australia, where the company had discovered internal misconduct and accounting errors, it said.
The SEC's investigation is ongoing, according to Mancuso. "It will be over when it's over, we can't predict when that end will come," he said during the conference call. "At this moment we are not aware of any new material issues or any expansion of the investigation," he added.
Other talk on the conference call centered on the macroeconomic environment for both government and commercial IT spending.
"It continues to be a dynamic environment, there's obviously pressures on the defense budgets," Laphen said. "We still expect to see some erosion next year."
In Europe, CSC has seen a slowdown in its Business Solutions and Services division, particularly in banking, but CSC hasn't been "overly exposed" to weakness in financial services there because its focus is largely on insurance companies, Laphen said.