Computer Sciences Corp (CSC) became the latest IT consulting and services firm to announce cutbacks last week, saying it will eliminate 700 to 900 jobs because of revenue and earnings that are far lower than expected.
CSC said financial results for its fiscal fourth quarter ending March 30 are being affected by a decline in demand for technology consulting and systems integration services - a situation that has now spread from users in the US to users in Europe. The company said its healthcare software licensing and services business has also been hit hard.
CSC estimated that its fourth-quarter earnings would be in the range of 35-37 US cents a share on a diluted basis, well below analysts' predictions of 92 cents per share. Revenue is now expected to grow 11-13 per cent over the level from 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, it said today, demand has "deteriorated" on a more widespread basis during the current quarter, resulting in lower profit margins and longer sales cycles.
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 per cent, but CSC said it's developing further plans "in the event of a delayed economic recovery".
In an attempt to minimise 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 costs of the cutbacks.
Cuts to CSC's Australian staff were unknown at the time of press.