For the last 10 years, every single move from top management has been driven by one and only one consideration:- Share Price. This has come mostly at the cost of human resources, and everything else that goes with it such as image erosion, opportunity cost, lost business etc.
The focus solely has been the share price next month/next quarter.
We have not shied away from doing bizarre things such as booting out direct billable resources to reduce cost, in order to meet cost cutting commitments made to shareholders.
I have often been confused at this approach.
Our shareholders are not unique. They also hold shares in other major corporations, and none that I know of has displayed this level of employee apathy to please the shareholders. How is it so that the same shareholders are prepared to hold their horses and allow the management of those companies the bandwidth and breathing space to put the plumbing in place for sustained growth (even if that means a few bad quarters of share price to start with), while they are breathing down our neck and not prepared to cut the same slack to us? Why are we being treated differently by our shareholders? Do they not realize that this can only lead to eventual tanking of the share and colossal losses to themselves? Look at the climbdown from $93 at its peak under ML , which was achieved solely by virtue of cost cutting and phoney acquisitions, to the eventual fall and not clawing back to those levels ever again. The rise did not have a solid foundation, hence the fall was inevitable. The same history seems to be poised to repeat now with this $500 M cost cutting pledge.
Any thoughts?
9 replies (most recent on top)
@1cfa+1iBFRqb3 That's a fair evaluation. -amature investor
Net assets were $5.375 billion according to the accounts at 31/3/2022.
Since then they sold off a part to EY in august, and have had a bad very quarter so there will be a writedown in the value of the business.
With the drastic actions been taken now the company is obviously in a mess so a writedown probably to $4.6 billion.
No sight of any positive news or pay raises so the horizon hasn't improved.
You can wait a few years to see if things improve but if you look at Sally's track record over the last 3 years the company has only gone one way and that's shrunk massively. If ge was capable things would have turned round by now.
Why would you buy a company that's constantly shrinking and cutting just to maintain margins.
They even tried a $1 billion buyback to try and prop up the share price for their wages but wall street worked Sally out and the share price dropped from $40 to $25.
The management are in capable of growth, so buy when it's dips to $15 per share if you want to take a gamble.
@1mql+1iBFRqb3 DXC's net income improved in FY'22 vs FY'21 (I'll ignore Earnings Per Share due to the share repurchase) meanwhile share holder equity is about $5 Billion vs a makert cap of $6 Billion. Say you give it a year and net income is $500 million that would cut the difference in half. You could've purchased DXC at around a $5.5 Billion valuation last week. If you did that then the question basically becomes can DXC sell assets for a premium above book value? Certainly Luxoft could be, no? If you have better sources i'd very much like to see them as all I have to go off of is public filings and a forum called the layoff.com its difficult to trust what is said here (not trying to imply you are lying).
@1kpf+1iBFRqb3
Based on historical valuations, if you thing DXC's share price is dirt cheap now, just wait. We'll soon see zero.
Debt is 5billion so you won't have much left on that valuation.
Eps have been falling year in year, at one stage was around 4usd but falling.
If fcf is so good why aren't they paying staff when the rest of the it industry are.
Dividends havent been paid since mike 2 has taken over.
Revenues keep falling, no sign of any , all just talk.
Customers maybe happy but they won't be after the non pay raise as employees won't be going the extra mile.
Kyndryl have a 19billion turnover and a much cheaper price tag of under 2 billion. Likewise with Atos.
That's why the market doesn't believe Mikey and you think you have a cheap share.
You need to do more research to become a professional, don't believe everything salvino says as you should be able to work out he doesn't always speak the truth. He just milks the company raising his pay by 7 million extra this year.
Better shares out there.
I am an amature investor who is following DXC. To be candid with you the truth is none of this matters to share holders. On paper DXC is dirt cheap. The company generated about $16 Billion in revenue and $700 Million in free cash flow last year. (A $1.6 Billion improvement) It's current market cap is only $6 Billion. Many quote the revenue decline and leave out that significant portions of DXC have been sold off and the euro and dollar have reached parity. As a result Nominal revenue is not very useful. Meanwhile on an organic basis revenue was down 2% yoy in the most recent quarter hardly a major disaster. I think we all agree that if DXC where sold off in pieces the value would be more than $6 Billion. So the only thing an investor realistically cares about here is that DXC continues to generate ok Free Cash Flow, Buys Back shares and sell various parts of itself for above the stock markets current valuation. (All of which M2 is doing) If this continues investors will make money. You'd be right if you pointed out that this is an issue with capitalism. But in reality investors are greedy especially when your looking at a big opportunity to make money. As to the accusations of fraud, I often hear this mentioned but no one actually posts anything that is viewable externally. Which items in the finacials are specifically fraudulent? Does DXC's auditor miss them? How do we know you are correct? At the end of the day from an investors standpoint we are left with a company that appears to be leveling off and substantially undervalued yet has a significant amount of angry employees. How does one determine if these employees are the norm or relegated ro specific areas of the buisness? Professional investors will point to improving ratings on major employee review sites such as glass door. Its difficult to quantify this especially in a corporation with over 100k employees. I've personally also spoken with DXC customers (insurance) and belive it or not they've told me positive things. So what to make of all this? Honestly I'm not sure which is why I continue to watch.
@1suv+1iBFRqb3
I don't think anyone could have put it any better. Your analysis is spot on.
So, the fact is, Shouty and his merry men have been busy looting the coffers...
But the question is, how come the shareholders are allowing it to happen, knowing fully well that this is hollowing out the company and nothing will remain of it eventually.
Human greed is understandable , but where are the checks and balances? How come something like this is not happening/cannot happen in IBM/Accenture/EY etc?
That is the mystery for me... how is this happening in full view of everyone including shareholders, regulators etc? Why is this fraud and loot not being detected and called out? Surely, it is not up to employees to do that... that is why we have regulators.
My thought is very simple. (I'm an ex-DXC senior manager).
DXC's approach has been driven solely by the short-termist nature of Wall Street. Everything, everything, is driven by in-quarter profits and nothing else. I saw potentially profitable RFPs qualified-out because there wouldn't be an in-quarter return if DXC won the bid. I saw billable consulting resources sacked to reduce costs, even though those resources were generating revenue. I saw customers leave due to the removal of their teams as part of WFR. I've seen DXC submit bids that they knew wouldn't be profitable until after WFR had reduced the size of the account team - leading to poor customer satisfaction and no renewals.
None of this mattered to DXC management, as the cost savings boosted the results for the current quarter. No-one cared that they made the next quarter worse, that was easy to solve by another round of WFR.
Salvino could have stopped this process. He'd need to have accepted a few quarters with lower profits (note, lower profits not losses). He'd have needed to resource accounts properly, and to write new business at higher margins to ensure long-term profitability. Following the few quarters of lower profits, DXC would have started to reap the benefits of higher margin business and improved customer satisfaction and would have been able to build sustainable growth across regions and sectors. But the short-termist approach and focus solely on quarterly profits has ensured that this didn't happen. The only people to benefit from this are the very small group of five or so senior leaders, mainly Salvino himself.
Contrast this with well-run IT organizations such as Capgemini, Accenture, PA, etc. Their focus is exclusively long-term, and is built on establishing trusted relationships with their clients. Those clients are happy to pay a little more, knowing that their supplier will deliver. These organizations generate great results by default - the in-quarter figures are good because the whole organization is healthy, not because of endless rounds of cuts.
Warren Buffet is taking a huge stake in dxc - there seems to be something cooking for sure.