Computer Sciences Corp. (CSC), a technology contractor for governments and companies, rose the most in three decades after naming Mike Lawrie its next chief executive officer as it renegotiates a U.K. government agency contract.
Computer Sciences, based in Falls Church, Virginia, advanced 19 percent to $31.39 today in New York, its biggest one-day gain since July 1980. The stock was the top performer in the Standard & Poor’s 500 index.
The company yesterday named Lawrie, CEO of London-based Misys Plc (MSY), as its new head. Today Computer Sciences delayed revising its fiscal 2012 forecast and wrote down almost $1.5 billion of its investment in the disputed contract with the U.K.’s National Health Service. Chief Financial Officer Michael Mancuso said today he plans to leave in May.
“This CEO has a background of somewhat of a change agent,” Darrin Peller, an analyst at Barclays Capital, said today in a telephone interview. “In his prior experiences he’s been looked at as somebody that can help in terms of restructuring, or helping a company move in the right direction.”
Still, today’s rally “is probably a bit presumptuous given that the SEC is still involved in the company and they’re not even giving guidance,” said Peller, who has a “neutral” rating on the shares.
Computer Sciences is being investigated by the U.S. Securities and Exchange Commission over accounting irregularities in its Nordic and Australia regions, as well as some Americas outsourcing and other contracts. The company expanded its internal audits last year, and appointed Chris DePippo as chief ethics and compliance officer.
In May, U.K. Prime Minister David Cameron said his government wouldn’t sign any more agreements with Computer Sciences until reviews are finished about how a contract to centralize records for every U.K. patient missed deadlines. In August, a panel of lawmakers also recommended close examination of discussions about the matter.
“Discussions have evolved into a potential go-forward framework that is currently in the government’s review process,” current CEO and Chairman Mike Laphen said today on a conference call. “It’s in the review process and as soon as we have something back from them” the company will provide earnings guidance.
Computer Sciences reduced the contract value by $1.49 billion, or $9.93 a share from continuing operations, for its third quarter ended Dec. 30. It also wrote down another $60 million, or 39 cents a share, in its health business solutions unit.
The company had said Dec. 27 it would revise its outlook and could write down its entire $1.5 billion investment in an electronic patient-records contract in the U.K. Computer Sciences said at the time it may also incur additional costs as the agreement is renegotiated.
Computer Sciences reported a net loss of $1.39 billion, or $8.97 a share for the third quarter, compared with a profit of $242 million, or $1.55 a share a year earlier, according to the statement. Profit excluding the writedowns of $1.35 was boosted by more than 80 cents of tax benefits, the company said today on the conference call. Analysts had estimated adjusted earnings of 58 cents, the average of 13 surveyed by Bloomberg.
Sales fell to $3.76 billion, from $4 billion. Analysts had estimated $4 billion.
Lawrie and IBM
Lawrie, 58, will join Computer Sciences “no later than” March 31, Computer Sciences said yesterday in a statement. He has also joined the board. Rodney F. Chase will become non- executive chairman. The company said in October that Laphen would retire as CEO and that he would leave no later than Oct. 31 of this year.
“CSC has had challenges recently, but we have an outstanding core business consisting of world-class customers supported by a premiere dedicated staff,” Laphen said in his closing remarks on today’s call. “I’m confident that the challenges will evolve into successes under Mike Lawrie’s leadership.”
Lawrie was executive chairman of Allscripts-Misys Healthcare Solutions Inc., a provider of electronic health record technology, from October 2008 to August 2010, Computer Sciences said in yesterday’s statement. Earlier, he was a general partner at ValueAct Capital, a San Francisco-based investment firm; CEO of software group Siebel Systems Inc.; and worked at International Business Machines Corp. (IBM) for 27 years.
At IBM, Lawrie worked under former CEO Lou Gerstner, who led a turnaround at the Armonk, New York-based technology company.
“He learned a lot from Gerstner and will be applying some of the same techniques at CSC, because we really do need some transformation,” Irving W. Bailey, lead director of Computer Sciences, said in a telephone interview yesterday. “Our results have been not what our investors deserve.”
Lawrie is an American who has spent years commuting between his job in London and a family home in Connecticut, Bailey said. His experiences doing deals and overseeing electronic health records are “a plus,” the lead director said.
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