CSC Managed Services Business: Mid-Market, Enterprise Recovery

CSC Managed Services Business: Mid-Market, Enterprise Recovery

Computer Sciences Corp. (NYSE: CSC) is starting to regain momentum in the mid-market and enterprise managed services market. During an earnings call earlier today, CSC said managed services quarterly revenues were $1.64 billion, up 1 percent year over year. Not exactly rapid growth. But last year's accounting controversy and MSP setbacks seem to be ending. In fact, CEO J. Michael Lawrie sounds like he's set to share more details about the company's ongoing turnaround effort on Sept. 10. Here's a preview.

Let's start with CSC's managed services business -- where operating income for the most recent quarter was $95 million -- up an enormous $86 million compared to the corresponding quarter last year. According to a CSC statement, the increase was driven by significant improvement in the performance of our focused list of contracts, which partially offset a workforce restructuring charge of $13 million in the quarter. The company said it also benefited from new client engagements and the AppLabs acquisition. Plus, CSC signed $2 billion in new managed services bookings during the quarter.

What a difference a year makes. Indeed, the SEC has been investigating CSC's accounting and the company continues to cooperate fully. Now here's the interesting part: CSC has an audit committee that set up an independent investigation into the accounting errors.

Said CEO J. Michael Lawrie:

"The committee has determined that independent investigation is complete. Since the filing of our fiscal 2012 10-K, the independent investigation did not identify any new accounting errors, although our 10-Q will identify certain items that management believes could result in immaterial changes in the amount and allocation of period adjustments for fiscal 2013 in prior years. So the independent investigation has been completed. We'll continue, of course, to work with the SEC investigation and are cooperating fully as that goes forward."
Lawrie isn't exactly giving CSC a clean bill of health, but he seems to be signaling that there are no hidden accounting surprises coming. And he plans to give more details to financial analysts on Sept. 10:
"When we get together on September 10, I'm going to share more details about the new operating model, what our intentions are in terms of standardizing many of our services' offerings and our ability to scale those on a more global basis, as well as our transition to cloud computing, our investment efforts around cyber security and the standardized global processes and support functions that will drive greater efficiency, help us take cost out of the business and also improve our go-to-market model. So we will go in much greater detail on some of these turnaround actions when we get together on September 10."
Lawrie certainly sounds upbeat about that September 10 meeting. Sounds like CSC is ready to turn the page on those accounting and managed services questions from a year ago. We'll likely find out more on Sept. 10.
TAGS: Financing
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