CSC enters turnaround mode

Just a couple weeks into his new job, Computer Sciences Corp.’s CEO Mike Lawrie described a troubled company that is beginning a “significant turnaround effort.”

The company’s revenue is flat – a positive in this environment – but profitability is down because of problems with certain projects including a troubled project with the United Kingdom National Health Service contract, company officials said in an analyst call April 11.

“The business is significantly under performing,” Lawrie said. “We do have significant challenges but clearly it can be fixed.”

Among the issues he has identified are profitability from projects that were either won by bidding too low or have had performance issues.

Also, the market has significantly shifted but CSC has not moved quickly enough to higher value offerings, he said.

“Internally, the operating model is overly complex and lacks accountability,” Lawrie said. “The cost structure also doesn’t match the reality of business today.”

CSC also has not done a good job of integrating its acquisitions over the years, he said.

“There is significant work ahead and there will be restructuring going forward,” Lawrie said.

He plans to establish a leaner operation with clearer lines of accountability. “Needless to say there will be some leadership changes as we move forward,” he said.

Unprofitable contracts also will either need to be fixed or renegotiated, he said.

Lawrie did point out positives at the company including its public-sector business, software products, intellectual property and geographic presence. The company also continues to build its pipeline of new business.

By mid- to late summer, CSC will be able to lay out more concrete steps for the turnaround and the “metrics we will use to hold me and the management team accountable,” he said.