ICN Direct Newswire

May 2003

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** LATEST NEWS IN THIS WIRE **

1. EDS faces further SEC investigation
2. Getronics cuts 5% of workforce
3. CSC buoyant at year end
4. CGEY slips but sees stability ahead
5. BearingPoint builds on acquisitions
6. Further information - feedback/forward to a colleague/unsubscribe

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1. EDS FACES FURTHER SEC INVESTIGATION

EDS is facing a second investigation into its business activities by the US Securities and Exchange Commission (SEC).

The move follows the release of EDS's latest financial results, which showed a first-quarter net loss of $126 million - reversing a net profit of $354 million in last year's comparable quarter. The company's revenues for the quarter to 31 March rose 2% to $5.37 billion, while contract signings collapsed from $7.2 billion a year ago, to $3 billion.

The loss was largely attributed to a $334 million deficit on a major US Navy contract, plus $48 million in severance pay for ex-CEO Dick Brown. In a regulatory filing, EDS said the SEC had asked for information related to the $7 billion US Navy Marine Corps intranet contract, which is not expected to generate revenues until the end of this year and will not be profitable before next year.

Responding to the SEC request, EDS said it was "providing documents and information".

The enquiry follows an existing SEC probe into EDS's affairs, launched last October, after the company warned it would miss profit and revenue targets in the third and fourth quarters, and following the payment of $225 million to settle derivative obligations associated with its employee stock option scheme. The SEC has yet to conclude or comment on that investigation.

2. GETRONICS CUTS 5% OF WORKFORCE

European IT services firm Getronics is continuing to cut staff as it struggles to find a route back to profitability.

The company said that around 5% of its worldwide workforce - between 1,000 and 1,200 staff - will be lost. Its Italian and Spanish operations will be particularly hard hit, suffering around 500 and 250 job cuts respectively.

Getronics also intends to close 20 offices worldwide and consolidate IT infrastructure as it implements what it describes as "cost-effectiveness measures to match operating costs to current market conditions and anticipated revenues".

Further changes planned for the next few months include a global re-skilling programme and the hiring of 250 graduates to strengthen Getronics' capabilities in security, voice over IP and Microsoft.NET technology development.

The company has also sold Getronics Human Resources Solutions to NIB Capital Private Equity for $354 million cash - realising a book profit of $303 million - and says it will close or sell 10 more under-performing assets in an effort to return to profitability.

Its new management team of chairman Axel Ruckert and vice-chairman Klaas Wagenaar recently cancelled a controversial debt-for-equity swap, saying the company could survive on the basis of asset sales and a focus on profitability.

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3. CSC BUOYANT AT YEAR END

IT services provider CSC has reported a 28% jump in net profits of $440.2 million for the year to 28 March. Revenues for the year slid 0.3% to $11.3 billion, with new business awards totalling $7.7 billion.

CSC's fourth-quarter net profit rose 15% to $162.7 million, on revenues inching up 1.4% to $3.1 billion.

The company attributed the quarterly profit gain to its federal government activities, which were augmented on 7 March by the acquisition of Dyncorp. It also pointed to a revenue increase in Europe that was accentuated by favourable currency exchange rates. Together, these gains offset continued softness in global demand for short-term commercial IT services.

CSC chairman and CEO Van Honeycutt said: "Allowing for the challenging global IT market, we are pleased with our results for the fourth quarter."

Looking forward, he added: "We continue to see signs of demand stabilisation in North America for consulting and systems integration services, and our efforts in that marketplace have resulted in meaningful improvements year over year. While we have not seen similar signs of stabilisation in consulting and systems integration activities in Europe and Asia, we are encouraged by the continued solid performance of our European commercial outsourcing business."

CSC pointed to significant fourth-quarter revenue growth in its US government work - including contracts with the federal government, Department of Defense and civil agencies. But it said global commercial revenues fell 5.2% in the quarter to $2.1 billion, with only Europe showing a small revenue gain.

As it enters fiscal 2004, CSC is forecasting a 25% increase in revenue in the first quarter and full-year revenues of between $14.3 billion and $14.7 billion.

* CSC has consolidated its worldwide business transformation services into a single business unit. The global transformation solutions group will house 10,000 application experts across six continents and 15 application centres, offering business transformation outsourcing from CSC's onshore and offshore facilities.

4. CGEY SLIPS BUT SEES STABILITY AHEAD

Cap Gemini Ernst & Young (CGEY) has reported first-quarter revenues down 17% at $1.8 billion - but the company promises that a slight revenue decrease in the first half will be followed by stabilisation in the second half.

First-quarter revenues - down year-on-year and quarter-on-quarter - were in line with CGEY's expectations and at constant exchange rates would have been down 10%.

Looking forward, CGEY said: "In what is still a very tense and very competitive market offering little visibility, the group's priority is to continue to improve its cost structure in order to preserve its potential for margin improvement."

CGEY's home market of France is proving particularly challenging, with revenues falling 12% in the first quarter.

Job cuts brought CGEY's total headcount down from 52,683 at the end of December 2002 to 50,402 at the end of March, while first-quarter bookings improved 20% to reach $2.3 billion.

5. BEARINGPOINT BUILDS ON ACQUISITIONS

BearingPoint has attributed a 43% gain in its third-quarter revenues to the acquisition of international Andersen business consulting units and the consulting businesses of KPMG in Germany, Switzerland and Austria. As well as growth through acquisition, BearingPoint said organic growth of 6% in North America supported its revenue advance to $628.3 million.

Net profit in the quarter to 31 March fell 48% to $12 .4 million after a charge of $11.9 million against job cuts announced last year. The company reported net profit of $23.7 million in last year's comparable quarter.

BearingPoint chairman and CEO Rand Blazer commented: "The solid results we achieved this quarter are indicative of our ability to stay focused on our clients, deliver real value to their business and integrate our newly acquired practices quickly and efficiently."

Demonstrating its increased global reach, BearingPoint said North America generated 68.6% of gross revenue in the third quarter, ahead of EMEA on 19.2%, Asia-Pacific on 10.2% and Latin America on 2%. In the third quarter of the previous fiscal year, North America contributed 91.4% of gross revenues, EMEA 1%, Asia-Pacific 5.9% and Latin America 1.7%.

BearingPoint continued to cut costs through the quarter, curtailing the use of subcontractors and squeezing its travel, selling and administrative expenses. It closed the first nine months with net profit of $44 million, reversing a loss of $27.3 million a year ago, and net revenues up 37.3%.

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