Top 100: CSC keeps focus during troubled times
Computer Sciences Corp. is weathering a difficult period, but new leadership is putting renewed emphasis on performance and profitability.
UPDATE: This article was updated to clarify the amount of new business booked by the company's public sector business in 2012.
Even amid major change, Computer Sciences Corp. recognizes that when something works, don’t change it. With new chief executive and financial officers at the helm, the company is holding fast to an operations philosophy it adopted last year based on federal customers benefitting from commercial solutions.
“Our clients are looking more and more to commercial solutions to solve their efficiency and effectiveness problems, and we have those solutions,” said David Zolet, president of business development at CSC’s North American Public Sector. After this interview, Zolet was named public sector president, replacing James Sheaffer, who is retiring.
That approach helped the company reach the No. 9 spot on the Top 100 with $3.6 billion in prime contracts in government fiscal 2011.
The government business provided a bright spot for the company by capturing $6 billion of the $19.3 billion in new business awards the company booked in its fiscal 2012, which ended March 30. That’s up 30 percent for the entire company from the previous year.
Achievements in the areas of health, cyber and cloud computing contributed to CSC’s success, Zolet said. The company’s September acquisition of Maricom Systems Inc., a Baltimore-based company with a focus on business intelligence and data management solutions for health IT systems, helped CSC land a $105 million contract to support the Centers for Medicare and Medicaid Services’ Enterprise Data Services. CSC also acquired iSOFT Group Ltd., a provider of advanced health care IT solutions in July.
Last May, CSC won an $80 million contract to support the National Institute for Occupational Safety and Health’s World Trade Center Health Program, which monitors the status of first responders and others affected by the 2001 terrorist attacks.
In the cyber arena, the Air Force awarded the company a $30 million contract in January 2011 to provide cybersecurity services for the 33rd Network Warfare Squadron, including protecting automated information systems and networks and helping the service defend its portion of the Defense Department. In November, it won a Navy contract worth $145 million to support the Fleet Cyber Forces’ Navy Enterprise Network abroad.
Cloud is among the sectors with growth potential. In February 2011, CSC launched BizCloud, an on-site private cloud that can be ready for use by government agencies in 10 weeks.
“We’ve been investing in those capabilities for quite some time because that’s what our commercial clients are buying,” he said. “The ability then to take that investment and leverage that investment to our federal space is why we’re so bullish on the activities for the next couple of years.”
Still, CSC faces challenges. Although the company is confident in its new president and CEO, Mike Lawrie, and vice president and CFO, Paul Saleh, Zolet said, the federal marketplace presents two main obstacles: budget constraints and election-year uncertainty.
“Our clients don’t really have a good handle on how much they’re going to be able to spend now and in the future, so that’s causing them to either be slow or not make decisions,” Zolet said. “The headwinds for all of us are around the shrinking budget and the election and what comes out of that.”
The diversity of CSC’s portfolio is in its favor, said John Allen, chief executive officer of Bluestone Capital Partners. “They have a sizable business in the public sector – probably about a little over a third of the company – and they have a sizable business in non-public-sector or commercial markets, so that diversity to their portfolio gives them a lot to work with.”
The company has announced that is looking to make $1 billion in cuts to its operating costs as well as renegotiating troubled and unprofitable contracts. For fiscal 2012, CSC reported a loss of $4.2 billion on continuing operations, mostly from its troubled United Kingdom National Health Service contract.
“New leadership is looking to come in and improve performance on large-scale projects and improve the profitability of the business, and really take what I think is a very strong portfolio of business and integrate them effectively to get the most out of them,” Allen said.