It’s already been something of an annus horribilis for CSC, but the final days of 2011 have brought even worse news for the company’s shareholders, with the announcement that it might be forced to write off the $1.5 billion value of a disputed contract with the NHS.
Over at eHealth Insider, there’s a summary of the year’s events that details the serial catastrophe for the company, starting in February with its missing yet another deadline for the delivery of its Lorenzo patient records system. That accelerated in May, with a scatching assessment of the CSC contracts by the National Audit Office which essentially delcared that the original vision of an integrated care records service would never be delivered; the £2.7 billion already spent had not delivered value for money and the remaining £4.3 billion looked like being an equally fruitless investment. In August, the public accounts committee suggested that doing a new deal with CSC was, umm, not altogether sensible.
Even that failed to quash occasional outbreaks of optimism, along the lines that a memorandum of understanding in May indicated that revised terms might not be a complete disaster for CSC, and suggestions it might be more expensive to drop CSC than to patch something together, somehow.
Now in a filing to the US Securities and Exchange Commission, the company reveals that itwas recently informed that the memorandum of understanding and the proposed amendment would not be approved by the U.K. government, and that it expected further discussions in January over proposals that would make modifications to the scope and value of the contract,which “differ materially” from those in the memorandum of understanding.
Until those negotiations are completed, CSC said it could not estimate the amount it would have to write down in the third quarter of its 2012 fiscal year, but the total could be equal to its net investment in the project, which was $1.5 billion as of Nov. 30. It is possible that the company will take on additional costs as well.
Last month, CSC revealed a Securities and Exchange Commission investigation of its accounting in the Nordic region had been recently expanded to Australia. It posted a $2.88 billion loss for its fiscal second quarter on a large write-down that reflected the investigation, declines in its stock price – off 50 per cent this year – and challenges in its business.
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