ICN Direct Newswire

January 2003

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** LATEST NEWS IN THIS WIRE **

1. EDS faces formal SEC inquiry
2. BearingPoint cuts jobs
3. EDS gets new CFO
4. Accenture meets forecasts in first quarter
5. T-Systems seeks international partners
6. Further information - feedback/forward to a colleague/unsubscribe

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1. EDS FACES FORMAL SEC INQUIRY

EDS is facing a formal investigation by the US Securities and Exchange Commission (SEC) into a profit warning last year that shocked the market and caused a 34% decline in EDS' share price.

The probe, which follows an initial informal enquiry launched in September, centres on events leading up to the warning, and a further financial fumble concerning EDS' use of hedging activities that pushed its share price down an additional 29%.

EDS responded to news of the formal enquiry by saying it would "continue to co-operate fully with the SEC in this matter".

Since the problems, EDS chairman and CEO Dick Brown has sought to calm investor fears, announcing 5,000 job cuts and the intention to sell non-strategic assets.

But EDS has suffered more knocks in the loss of potential major contracts with Procter & Gamble and JP Morgan Chase. It has also cut its fourth-quarter and full-year earnings estimates by 10% to cover a $40 million write-down on aircraft leases with United Airlines, which has filed for Chapter 11 bankruptcy.

2. BEARINGPOINT CUTS JOBS

BearingPoint is shedding 25% of the employees it took on when it acquired the German, Swiss and Austrian consulting units of audit firm KPMG just five months ago (ICN Direct 1).

It is also axing a further 450-550 employees in the North American and Asia-Pacific regions - approximately 3% of its global workforce - as it struggles to balance staffing levels with market demand.

The European cuts total about 700 jobs in Germany, Austria and Switzerland. They have been made in response to falling market demand and are part of a restructure that will group the remaining 2,100 employees at BearingPoint GmbH into four divisions. The divisions are: business consulting - targeting the financial services, communications & content, consumer & industrial and public sector markets; global solutions delivery - essentially covering SAP projects; managed services; and technology procurement services.

The cuts were accounted for when the original acquisition was made, and will not therefore appear as a charge against earnings in BearingPoint's second quarter to 31 December 2002. The job cuts in North America and Asia-Pacific are expected to result in a charge of between $17 million and $23 million against third-quarter earnings.

BearingPoint chairman and CEO Rand Blazer explained: "Through recent acquisitions and hires over the past six months, we have essentially doubled the size of our workforce in order to seize global market opportunities. The net result has been positive, as we now have a broader client base and have increased our access to new business opportunities. With these workforce actions we are addressing some excess capacity issues relative to current market demand."

3. EDS GETS NEW CFO

EDS is replacing its chief financial officer following a string of financial disasters, including a surprise profits warning last September and the subsequent collapse of its third-quarter earnings (ICN Direct 1).

Jim Daley vacates the role of CFO next month, after nearly four years in the job, though he will continue as head of EDS' client solutions, global sales and marketing.

He will be replaced as CFO on 10 February by Bob Swan. Swan joins EDS from US defence company TRW, where he was appointed CFO in 2001. He previously worked as CFO and later CEO of Webvan Group, and as CFO for a number of companies within General Electric.

EDS chairman and CEO Dick Brown said: "Bob Swan brings EDS years of blue-chip financial experience. His expertise, experience and energy blend well with the practices Jim Daley has implemented over the past four years. The ability to bring Bob in now strengthens the leadership team and ensures an effective transition in finance."

Following the September profits warning, Brown sought to reassure shareholders about EDS' financial position in an open letter. As well promising a reduction in overheads and a new sales focus, he admitted that EDS' financial forecasting systems had failed, saying: "I have commissioned a special team to review EDS' revenue forecasting processes and systems. While they served us well in the past, our systems did not meet our needs this quarter."

4. ACCENTURE MEETS FORECASTS IN FIRST QUARTER

Accenture has fulfilled its fiscal first-quarter financial forecasts - reporting a 3.6% gain in operating profit to $429 million, on turnover down 2% at $2.93 billion.

Accenture's communications & high-tech and government operating groups were the only ones to grow in the quarter to 30 November 2002, with turnover up 12% and 7% respectively. Financial services was down 7%, products down 9% and resources down 10%.

On a geographic basis, Accenture suffered a 3% fall in the Americas and a 6% drop in Asia-Pacific. Revenues of $1.33 billion in Europe, Middle-East and Africa were flat against last year's comparable period.

Accenture chairman and CEO Joe Forehand said he was still cautious about the future, but was pleased with the first-quarter results.

"Our success is due to our 75,000 employees around the world, whose continued commitment to help us run an extremely efficient organisation and stay focused on delivering value to our clients has enabled us to perform well and gain market share in this difficult business environment," he said.

Accenture ended the quarter with a strong balance sheet showing $1.5 billion in cash, up $157 million from the fourth quarter of fiscal 2002, and net debt of $62 million, down $5 million from the fourth quarter.

5. T-SYSTEMS SEEKS INTERNATIONAL PARTNERS

German IT services firm T-Systems has failed in its first attempt to extend its international business following a breakdown in talks with Cap Gemini Ernst & Young (CGEY).

T-Systems, the IT services division within Deutsche Telekom, began looking for strategic partners to expand its overseas business at the end of last year. It is widely believed to be offering a shareholding in the business in return for investment. This would allow it to access new markets and raise expansion funds that are unlikely to be forthcoming from Deutsche Telekom as it struggles to reduce debt from $67 billion to $53 billion by the end of this year.

Talks with CGEY are reportedly over, but T-Systems said it is in discussions with other potential partners who would give it access to clients beyond its strongest markets in Germany, France, Spain, Switzerland, Austria and Italy.

Neither T-Systems nor CGEY would comment, but it is believed the breakdown in talks was the result of disagreement over the financial structure of a deal.

IBM is reported to have been in T-Systems' sights, but any partnership proposal is unlikely to get past the German cartel office because of the large presence of both companies in the German market.

T-Systems was created in 2000 after the acquisition of German consultancy debis Systemhaus and its integration with the IT businesses within Deutsche Telekom. It claims to be Europe's second largest systems provider with 43,500 employees and 2001 revenues of $12.5 billion.

Around half these revenues are garnered within Deutsche Telekom, with the remainder coming from systems integration, outsourcing and hosting services offered to external markets.

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