Class-action lawsuit claims DXC 'selectively timed' job cuts to inflate short-term profit target (2024)

DXC Technology has been named in another class-action lawsuit that alleges mass redundancies were used by senior management to boost earnings but left the company unable to service contracted clients properly.

Bragar, Eagel & Squire PC, a New York litigator specialising in securities cases, lodged the papers on 16 September (PDF) with the US District Court for the Northern District of California on behalf of investors. A less kind publication may refer to the legal eagle as an ambulance-chaser, trying to drum up interest from current or previous DXC stock owners.

The class action, which names DXC shareholder Jason McLees as lead plaintiff, is being brought on behalf of investors that bought DXC stock "pursuant to and/or traceable to the company's April 2017 registration statement and prospectus" – which is when DXC started trading.

DXC published Offering Materials – a kind of prospectus for shareholders – on 27 February 2017 that talked of the firm wringing out $1bn in "synergies" in its first year due to greater economies of scale (volume discounts); workforce changes that included erasing role duplication; and reducing general admin overheads.

DXC said it would align costs with the revenue trajectory – $26bn was forecast for the merged firm in year one. The Offering Materials also emphasised DXC's ability to retain "highly motivated people with the skills necessary to serve their customers".

Class-action lawsuit claims DXC 'selectively timed' job cuts to inflate short-term profit target (1)

DXC hit with sueball over layoff steamroller's share price dip


The class-action lawsuit filed by Bragar, Eagel & Squire alleges:

The Offering Materials' representations, financial metrics and purported risk disclosures were false and misleading because they failed to disclose that Defendants' planned "workforce optimisation" plan was, in truth, earnings management in disguise. Defendants would impose arbitrary quotas that resulted in the termination of tens of thousands of workers, selectively timed to artificially inflate reported earnings over the short term and present misleadingly inflated quarterly and yearly financial reports to boost the stock price, ahead of insider sales, including by Defendant Lawrie, who exercised stock options to gain millions in personal profit.

DXC also offloaded overheads by consolidating office real estate and rationalising the number of data centres it runs worldwide.

The complaint further alleges that Lawrie – DXC's CEO from the merger until a fortnight ago when he was replaced by Mike Salvino – had actually made internal forecasts of $2.7bn worth of planned workforce reductions for first fiscal year, nearly triple the figure that was made public.

"The foreseeable impact of these severe, undisclosed cuts and firings was that DXC could not deliver on its client contracts and client satisfaction plummeted along with employee capacity and morale, rendering the financial metrics in the Offering Materials false and unrealistic," the complaint states.

It adds that the disclosure of these "material facts" – known events or uncertainties that could affect future performance – was required under US Securities and Exchange Commission regulations. And they should also have been included under "risks" in the Offering Material, it says.

As the "truth" emerged about its plans, the "price of DXC shares declined substantially", the filing reads.

The stock was trading at $31 apiece when the lawsuit was filed, down from the $59 per share valuation on the exchange date for the merger.

"Investors have thus suffered considerable losses as a result of the Defendants' misconduct and seek to recover their losses through this action," the filing adds.

Some shareholders may look to piggyback the lawsuit, if all goes to plan for Bragar, Eagel & Squire. Suits of this kind are not unusual when a company's stock price drops substantially. Whether this one is successful is a moot point.

DXC, the result of the spin merger between CSC and HPE Enterprise Services, started life with 170,000 employees but at last public admission had 130,000 people on the payroll. This was around April and since then, DXC has processed more redundancies, including in the UK and US, where almost half of the security team was cast off.

The Register has heard anecdotal evidence from staff that they are struggling to fulfil services contracts due to too many people being made redundant, but we have yet to be made aware of DXC losing customers due to the issue.

The strategy at the company has been to minimise declines in the legacy outsourcing business, which has been shrinking quarter-on-quarter, and ramp its cloud business with AWS et al to offset those lost revenues. The fruits of this effort have yet to pay off.

Employees caught in the middle have been collateral damage. The hope from at least some in the workforce is that Salvino, brought in to succeed Lawrie as CEO, will draft his own strategy to take the business forward, perhaps one that doesn't involve jettisoning thousands of the people who are supposed to be DXC's greatest asset.

A spokesman told The Register: "The allegations in this suit have no merit and DXC fully intends to vigorously defend the case." ®

Class-action lawsuit claims DXC 'selectively timed' job cuts to inflate short-term profit target (2024)


Is DXC laying off employees? ›

IT firm DXC begins fresh round of layoffs in India

Of the company's 1.3 lakh employees, around 38,000 are in India.

Should I join a securities class action lawsuit? ›

You are not required to join in the class action.

Investors may choose an individual action over a class action lawsuit if they believe they will fare better through an individual claim or have a specific set of circ*mstances that sets them apart from the rest of a class.

Is DXC getting sold? ›

DXC last night confirmed those talks are now over. “Due to the financial sponsor's challenges in raising the necessary capital, as a result of current market conditions, no formal proposal was received by the company and DXC has terminated the discussions,” the statement says.

What company did DXC spin off? ›

HP Enterprises spun off DXC Technology effective March 31, 2017 in a transaction meant to be tax-free to its shareholders. DXC Technology began normal trading on the NYSE on Monday, April 3, 2017.

Do you actually get money from class action settlements? ›

A Class Action Lawsuit Settles

The compensation is then divided among the plaintiffs based on their level of engagement, with the lead plaintiff receiving the first share. Lawyers typically earn a percentage of the fees and costs while practicing law. Courts limit payments to a reasonable sum.

Is there a downside to participating in a class action lawsuit? ›

Although joining together in a class action can be powerful, plaintiffs risk receiving a smaller individual payout if the award is distributed among many people. They may also lose their ability to bring an independent lawsuit if they are unhappy with the outcome.

Should I claim class action settlement? ›

Class actions are a great way for people with minor claims to join together and hold a negligent or dishonest party accountable. If you have a small claim, joining a class action means you don't need to worry about lawyer's fees, hiring legal help, or participating in any court proceedings.

What is the outlook for DXC? ›

DXC Stock 12 Month Forecast

Based on 7 Wall Street analysts offering 12 month price targets for DXC Technology in the last 3 months. The average price target is $21.86 with a high forecast of $24.00 and a low forecast of $19.00. The average price target represents a 8.86% change from the last price of $20.08.

What is the future of DXC Technology? ›

Future Growth

DXC Technology's revenue is forecast to decline at 2.7% per annum while its annual earnings are expected to grow at 79.8% per year. EPS is expected to grow by 73.1% per annum. Return on equity is forecast to be 21.2% in 3 years.

Which companies are not laying off employees? ›

Stronger together: List of companies that have refused to lay off...
  • Apple. Apple is among the few big-tech companies that have not resorted to laying off employees. ...
  • ASM Pacific Technology. ...
  • Atos. ...
  • Agilent. ...
  • CGI. ...
  • Cloudflare. ...
  • LG Electronics. ...
  • LITE-ON Technology.
Mar 22, 2023

Is working for DXC good? ›

DXC Technology has an overall rating of 3.5 out of 5, based on over 26,626 reviews left anonymously by employees. 65% of employees would recommend working at DXC Technology to a friend and 55% have a positive outlook for the business. This rating has decreased by 1% over the last 12 months.


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