CSC to cut as many as 900 jobs because of revenue shortfall

by Linda Rosencrance

March 22, 2001 —

Computer Sciences Corp. (CSC) today became the latest IT consulting and services firm to announce cutbacks, saying it will eliminate 700 to 900 jobs because of revenue and earnings that are far lower than expected.

El Segundo, Calif.-based CSC said financial results for its fourth fiscal quarter ending March 30 are being affected by a decline in demand for technology consulting and systems integration services -- a situation that has spread from users in the U.S. to users in Europe. The company said its health care software licensing and services business has also been hit hard.

CSC estimated that its fourth-quarter earnings will be in the range of 35 to 37 cents per share on a diluted basis, well below the average prediction of 92 cents per share from analysts who had been surveyed by First Call/Thomson Financial in Boston. Revenue is now expected to grow 11% to 13% over last year's fourth quarter, CSC said.

The company had previously indicated that economic uncertainties and capital spending constraints put in place by users were dampening its revenue expectations. But demand has "deteriorated" on a more widespread basis during the current quarter, resulting in lower profit margins and longer sales cycles, CSC said today.

In response to the ongoing business deterioration, CSC said, it's implementing a restructuring plan that includes the promised job cuts and other cost-cutting actions. The cutbacks would lower the company's workforce of 68,000 employees by only about 1%, but CSC said, it's developing further plans "in the event of a delayed economic recovery."

In an attempt to minimize the workforce reduction, CSC said it's shifting some consulting and systems integration employees to lower-margin assignments. The company expects to take a restructuring charge of $100 million to $150 million against its fourth-quarter financial results to cover the cost of the cutbacks.

Computerworld