CSC CEO Blames Sales Shortfall On Execution Missteps

Computer Sciences Corp. CEO Mike Lawrie Monday blamed "execution missteps" for a revenue shortfall that sent the system integration giant's shares down 8 percent to $59.75 in after-hours trading.

Declaring that the company must take responsibility for its poor execution, Lawrie vowed to fix the missteps that resulted in CSC's reporting sales of $2.95 billion for its third fiscal quarter ended Jan. 2, 7 percent below the Wall Street consensus of $3.18 billion, and 8 percent below the $3.22 billion in the same period one year ago.

Despite the revenue shortfall, CSC reported Non-GAAP diluted earnings of $1.18 per share for the quarter, handily beating the Wall Street consensus of $1.12 per share.

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With charges from a Securities and Exchange Commission settlement and pension charges, the company reported a net loss for the quarter of $314 million compared with net income of $271 million in the year-ago quarter.

In a call with analysts, Lawrie said the drop in sales was "primarily due to some unforeseen delays and execution issues" around a number of deals in the quarter.

"We have to take responsibility for our execution issues," Lawrie said. "It's not a market issue. It's not a contract issue. It's not a demand issue. It is an execution issue. [Going forward], we will not have so many execution missteps. We won't have some of these execution gaps as we go into the fourth quarter."

The CSC CEO said that his company found it more challenging than it anticipated to recruit and hire workers familiar with the IBM RPG programming language needed for deals that were already under contract to be completed by the end of the quarter.

RPG is a high-level proprietary programming language available on IBM i- or OS/400-based systems.

"RPG is not a programming language where a lot of people are learning it today, so there is a finite supply," he explained. "We had difficulty recruiting and getting those people on-boarded in time to be able to bill all the work that was under contract in the quarter. Part of it is execution. It's a matter of focusing week-in and week-out on what positions are open, how many people are in the interview process, how many people are on-boarded [and] how's the training going? That's all execution and yields to a better discipline."

Lawrie said to combat the problem, the company has been in contact with partners who may have access to needed skills. He added that CSC also has raised the salaries being offered to potential candidates of these vacant positions.