Bloomberg News

Computer Sciences Declines on U.K. Health-Contract Writedown

December 28, 2011

(Adds Moody’s review in second, sixth paragraphs.)

Dec. 27 (Bloomberg) -- Computer Sciences Corp., a technology contractor for governments and companies, fell after saying it will write down its investment in a U.K. contract by as much as $1.5 billion as the agreement is being renegotiated.

CSC, based in Falls Church, Virginia, declined 9 percent to $24.10 at the close in New York, the most since Nov. 10. It has lost 51 percent this year. Moody’s Investors Service placed all CSC ratings under review for possible downgrade.

The company will revise its forecasts for fiscal 2012 and book a “material impairment” in the third quarter ending this month that could total all of the $1.5 billion it has spent on a U.K. electronic patient-records contract, according to a regulatory filing. CSC said it may incur additional costs based on contract-amendment negotiations.

In May, U.K. Prime Minister David Cameron said the government wouldn’t sign any more contracts with CSC until reviews are finished of how it missed deadlines on its work on a nationwide computer system for the National Health Service, which aims to centralize records for every patient.

A panel of U.K. lawmakers in August recommended close examination of the negotiations over delayed work.

Moody’s said in a statement it’s assessing the cash-flow impact of the curtailed contract, as well as CSC’s prospects to replace the $5 billion in revenue originally expected from the U.K. order. It will also evaluate the effect of uncertainty in U.S. government spending, CSC’s managed services pipeline, and progress in resolving internal audit and Securities and Exchange Commission investigations.

--Editors: Ville Heiskanen, Romaine Bostick

To contact the reporter on this story: Beth Jinks in New York at bjinks1@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom in New York at pelstrom@bloomberg.net


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