IT services giant CSC is to launch a $1 billion cost cutting initiative following an "unacceptable" set of financial results.
CSC revenues fell 2% year-on-year to $4.1 billion during the three months ending 30 March, while net loss for the quarter was $153 million.
"We’re announcing today a $1-billion cost and expense takeout program to be executed over a 12- to 18-month period." newly appointed CEO Mike Lawrie, formerly of UK banking software vendor Misys, said on a conference call with investment analysts.
The cost cutting programme will be focused on general and administrative functions, Lawrie said, including IT. "It does not affect in any material way our customer-facing resources". The company’s total costs for the last 12 months were around $13 billion.
He said that the $1.5 billion write-down on its contract with the NHS was the principal driver for its dire financial performance in the most recent quarter. Earlier this year, the company had to cut the revenue it expected to earn from its contract with NHS to provide a electronic care records system, after the UK government cut the scope of the project.
Lawrie revealed that he is having weekly telephone conversations with the "head of the NHS". "I think having myself and the head of NHS on the phone every week working through any remaining issues is going to be a helpful management discipline to getting this across the line. "
He also said that the company had identified 40 "troubled contracts", most of which were in its managed services division.
"For all of these accounts, we have now implemented or are in the process of implementing remediation actions, including new leadership, transition controls, strong program management disciplines, and this gets monitored on a weekly basis and with me on a monthly basis," Lawrie said. "And some of the accounts really don’t show a clear path to financial health, and in these cases we are intending to either fix them or, in some cases, attempt to renegotiate them."
