WHEN Ian Livingston took the helm at BT, Global Services was a complete mess. One of the first things he had to do after becoming chief executive in 2008 was issue a dramatic profit warning due to underperforming contracts at the division, which competes with the likes of IBM for big corporate IT deals. Shareholders, already terrified by the unfolding financial crisis, panicked; the shares crashed by 27p to 115p – below their 130p IPO price – wiping £2bn off the firm’s market capitalisation. To say it was an inauspicious start is putting it mildly.
Global Services, the brain child of former boss Ben Verwaayen, had been winning business but at the expense of profit. The arm, which had been created to replace dwindling fixed-line telecoms revenues, was supposed to be a powerhouse; instead it had become an albatross around BT’s neck.
It is no exaggeration to say that Livingston’s reputation depended on sorting Global Services out. He quickly gave the arm’s boss the heave-ho and now, after a few false starts, shareholders are starting to see results.
Global Services revenue might have dipped and that was always the plan: fewer contracts, but more profitable ones. The division is expected to generate £100m operational cashflow in 2010-11.
Considering that most analysts didn’t expect to see positive cashflow until 2011-12, this is an impressive achievement.
It shows that the firm has managed to sort out some bad commercial deals very effectively.
Shareholders will want to see more of the same.