CSC posts $2.9 billion loss
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IT services giant reports huge loss following a $2.6 billion write-down of intangible assets
US IT services giant CSC reported a $2.9 billion dollar loss in its most recent financial quarter, following a "goodwill impairment" of $2.6 billion.
The reason for the impairment was the discrepancy between the company's market value and its "book value" – the sum total of all its assets.
That discrepancy reveals that the market thinks CSC has overestimated its intangible assets or "goodwill", such as the strength and popularity of its brand. It has therefore cut the estimated value of those assets to the tune of $2.6 billion.
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On a conference call with investment analysts, CSC's chief executive Mike Laphan said the reasons for its low market value included the troubled delivery of Lorenzo, the NHS' mental health care records system.
Last month, CSC was asked by the UK government to hand back £170 million in advance payments for the system, after it failed to achieve project milestones.
It was also sued by one of its institutional shareholders, which alleged it had failed to disclose the extent of its difficulties with Lorenzo.
Laphan took the opportunity to announce that "key milestones for Lorenzo 1.9 have now been achieved at the three early adopter sites, the University Hospitals of Morecambe, Birmingham Women's and Bury".
Other reasons given for the low market value were "US federal budget deficits" and uncertainties surrounding its managed services business. Earlier this year, the company launched an investigation into accounting irregularities in this division, and CSC has had to make various adjustments to its historical accounts.
According to a report by Reuters in August, activist shareholders have discussed the prospect of splitting CSC into separate companies.
