Under new CEO Mike Lawrie, CSC’s well-publicized turnaround is showing increased momentum. He put CSC on a new path, and that strategic shift shows modest improvement in margins. But they still have a big wrinkle to iron out — despite increased profits, CSC’s revenue has been flat to down. The question is: Will the market continue to support an increasing stock price without seeing increased revenue?
Lawrie took some big — and critical — steps to reshape CSC’s market position. He brought in new leaders, divested non-core portions of the business and invested those funds in a set of cloud offerings for CSC’s core infrastructure business.
He also revitalized the dispirited and somewhat lost CSC sales engine. Since Lawrie stepped on board, CSC consistently goes to market with an interesting and powerful story focused on next generation IT. And unlike some of its provider brethren, CSC is quite willing to sponsor disruptive cloud and other disruptive next generation technologies — even if they cannibalize CSC’s own client portfolio while attacking competitor offerings. We increasingly observe customer organizations reacting favorably.
The hard truth
Nevertheless, I think it will be difficult for CSC to increase revenue — ironically partly due to the fact that it clearly demonstrates willingness to cannibalize its portfolio of work. I think we’ll inevitably find that CSC is replacing existing captured work at 50 cents on the dollar.
To increase revenue, CSC must capture new logos and new opportunities very aggressively, and I think that will be a significant challenge. But I give them full credit for facing reality and taking a cannibalistic approach.
