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While most eyes were transfixed by CSC’s Q3 ‘miss’ and profit warning, we were more concerned about the news that the implementation of Lorenzo Release 1.9 at Pennine Care NHS Foundation Trust has slipped and now won’t happen until mid-2011. The NHS has formally notified CSC that it considers it has breached its contract by missing a key milestone last month and is considering whether to terminate the contract – in part or indeed the lot. CSC and NHS are now in deep discussion. The original deal was to be worth $5.4b to CSC.
Meanwhile, CSC continues to pour money into the NHS programme with miniscule returns. CSC invested a further $69m in the contract in Q3 for which it achieved the princely return of $18m in revenue. As bad as this looks, it is at least better than the prior quarter when it invested $120m for $23m return. And of course, this is after the near-billion dollar haircut the Government asked CSC take on the contract last year (see here), though they have yet to nail down the precise amount.
At what point, you might reasonably ask, might management take heed of the maxim, ‘if you are in a hole, stop digging’?
