CSC's Consulting, Staff Augmentation Businesses Struggle As Workforce Issues Persist

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Weak consulting and staff augmentation results dragged CSC's sales down for yet another quarter, though the company hopes to resume growing revenue by late 2017.

The Falls Church, Va.-based company, which was No. 5 on the CRN 2015 Solution Provider 500 before spinning off its public sector business, saw sales in the quarter ended Jan. 1 fall 4.9 percent, to $1.75 billion, after factoring for changes in foreign currency exchange rates. This fell well short of Seeking Alpha projections of $1.85 billion, the company reported Tuesday.

Non-GAAP earnings per share climbed 16 percent, to 71 cents, or $130 million overall, edging out Seeking Alpha estimates of 69 cents per share.

[Related: New Day Dawns: CSC Split, SRA Merger Done, Spawning $8.1B Commercial, $5.5B Public Sector Powerhouses]

"We saw a moderation in the trends of our legacy business, and continued strong growth in our next-generation offerings," CSC Chairman and CEO Mike Lawrie said Tuesday during the first earnings call after November's split with CSRA.

The solution provider recorded declining sales in both areas of its business, with global business services (GBS) revenue falling 2.5 percent on a constant-currency basis, to $886 million, and global infrastructure services (GIS) revenue sinking 7.2 percent on a constant-currency basis, to $864 million.

CSC's Americas region is further behind other areas in moving to higher value digital work, Lawrie said, which contributed to project-based consulting and staff augmentation projects' not materializing at the anticipated level.

Year-over-year consulting revenue fell globally by 10 percent on a constant-currency basis, though regions with more enhanced capabilities such as the United Kingdom delivered double-digit growth. Applications revenue was also down slightly on a constant-currency basis as declines in legacy staff augmentation engagements were not wholly offset by growth in higher-value app utilization work, according to the company.

Part of the challenge stems from a lack of employees, particularly in the Americas, who can carry out app utilizations and high-level IT consulting engagement, the company said. Much of the existing staff has more familiarity with legacy consulting and staff augmentation, Lawrie said. 

"To transform the business model of a company, you have to transform the skill set," Lawrie said. "The drag we are experiencing is in the acquisition of skills."

Additionally, concerns about the state of the global economy prompted some clients to push out the start date on their short-term consulting work by two or three months, which Lawrie expects to continue at least through the first three months of 2016.

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