It was thoughtful of BT to refrain from publishing its third-quarter financial results in colour, because anyone printing the thing would have run out of red toner long before the end.
A $336 million write-down and 81% plunge in pre-tax profits, brought about by a series of contract screw-ups at the company’s Global Services division, would ordinarily have had investors screaming for scalps. But BT had pre-empted that cry by ensuring that ten of Global Services’ management team of 14 were already long gone.
Worse, the ICT giant’s £336 million one-off charge to cover toxic contracts is unlikely to be the last; CEO Ian Livingstone said that two of BT’s largest undertakings, along with several smaller deals, are still under review, including the company’s multibillion pound NHS National Programme for IT. Those write-downs will come next quarter and are likely to be “substantial”, Livingstone said.
The quarterly report blames Global Services’ dire performance on the pursuit of growth at any costs. It cited “high costs and the slow delivery of cost savings, the continued decline in higher-margin UK business, changes in assumptions and estimates on some major contracts and the negative effect of foreign exchange movements” – all problems which are unlikely to go away in the near future.
If that did not raise eyebrows high enough, then a few other disclosures should. BT’s spending on software is currently running at a colossal £67 million a month – almost ten times its outlay on vans and other vehicles despite the fact it is the UK’s single largest fleet operator. Has no one there heard about this thing called 'open source'? In fact, BT is now spending more on software than on networking gear, computers and exchange equipment combined. What are they running over there? Vista?
Before Global Services CEO François Barrault was shown the door last October, he hosted a conference in Las Vegas where the guest speaker was astronaut Neil Armstrong. The link he wanted to make: BT would “go to the moon” for its customers and shareholders. Right now, many of them may be hoping it stays there.