ICN Direct Newswire

Current Issue: January 2004

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** LATEST NEWS IN THIS WIRE **

1. Accenture squeezed in first quarter
2. EDS buys IT consultancy
3. CGEY issues second profit warning
4. Atos Origin faces tough six months
5. Triaton under offer
6. Further information - feedback/forward to a colleague/unsubscribe

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IBM

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1. ACCENTURE SQUEEZED IN FIRST QUARTER

Accenture increased its profit 37% in the quarter to November 2003, on revenues rising 11% to $3.3 billion. But the company's gross margins were squeezed from 39.4% a year ago to 34.1%.

Accenture attributed this to a continuing shift in its business mix towards outsourcing - which has lower gross margins than consultancy - continued price pressure, and poor margins on three rogue contracts in its communications and high-tech operating group.

Consulting revenues in the quarter were down 1% to $2.1 billion, representing 64% of net revenues, with outsourcing up 45% to $1.2 billion, or 36% of net revenues.

Accenture's Europe, Middle East and Africa region made a 16% gain in revenues to $1.6 billion, with the Americas up 7% to $1.5 billion and Asia-Pacific up 6% to $220 million.

Accenture chairman and CEO Joe Forehand said: "We are seeing good business opportunities and are pleased with our strong new bookings. New bookings for the first quarter were $5.1 billion, our third highest quarter ever, with outsourcing new bookings at $3 billion and consulting new bookings at $2.1 billion.

"Our priority for the balance of the year will be to stay focused on execution. With utilisation improving and growth in our billable workforce, we can be more selective about the opportunities we pursue and how we price our services. We will continue to focus on executing the three growth platforms of our business strategy: scaling business consulting, extending our leadership in systems integration and technology, and accelerating our efforts in business process outsourcing."

Looking forward, Accenture expects second-quarter net revenues in the range of $3.1-$3.3 billion and full-year 2004 revenue growth of 8-12%.

2. EDS BUYS IT CONSULTANCY

EDS has acquired Dallas-based Feld Group and with it two senior executives who will join EDS' top management team.

EDS is paying $41 million in cash for the privately held technology management firm, as well as $48 million on restricted stock, warrants and options for Feld employees to acquire EDS stock.

Charlie Feld - founder of Feld and named by CIO Magazine as "one of the 12 most influential IT executives of the past decade" - has been appointed head of EDS' service offerings and solutions. Steve Schuckenbrock, chief operating officer of Feld's consulting business, becomes EDS executive vice president of global sales and client solutions.

They are managing two of the three core operations created under the leadership of EDS chairman and CEO Mike Jordan. Former ChevronTexaco chief information officer Dave Clementz was recently appointed to lead the third key area, service delivery.

Feld's 60 staff will also move to EDS, while EDS will take over the consultancy's IT and business process implementation software.

Jordan said: "We believe the addition of the Feld Group speeds our transition to an increasingly more cost-competitive high-value model, bringing world-class talent, consulting relationships and innovative IT management software, processes and methodologies. It also extends the Feld Group's range of transformation services to our clients and prospects around the world."

3. CGEY ISSUES SECOND PROFIT WARNING

Cap Gemini Ernst & Young (CGEY) ended 2003 with its second profit warning in four months, further cutting its expectations of second-half revenue and margins.

The company says its fourth-quarter revenue will be below expectations because contracts worth around $616 million - mainly in the US - were pushed into 2004. Second-half revenue for fiscal 2003 is now expected to come in at $3.3 billion, down from market expectations of $3.4 billion, but matching first-half revenue.

The sales shortfall will badly hit margins, which CGEY set at 5% early in 2003. In September, it reduced its full-year operating margin forecast to 4% and at the close of calendar 2003 it cut margin expectations again, this time to 2-3% of revenue.

While CGEY said it was sticking to its existing growth targets for 2004 and 2005 - although it declined to detail them - analysts were shocked by the company's inability to forecast correctly and said management credibility would be damaged by the issue of two profit warnings in such a short period of time.

The warning and resulting collapse in investor confidence followed a surge of enthusiasm after CGEY was awarded the UK Inland Revenue's $5.2 billion Aspire contract ahead of incumbents EDS and Accenture.

CGEY will work with Fujitsu Services on the contract, which will run for an initial 10 years with an option to extend for a further eight years. It will take control of the Revenue's IT systems on 1 July after a six-month transition period in which it will work with EDS and Accenture. As part of the deal, around 2,250 employees from EDS and Accenture will join CGEY.

4. ATOS ORIGIN FACES TOUGH SIX MONTHS

Atos Origin has issued a trading update for fiscal 2003, confirming that its revenues will be marginally lower than in 2002 but promising an operating margin of more than 8%.

The IT services company based the update on trading during October and November 2003, and forecasts another six months of tough market conditions across Europe despite some stabilisation in the region.

Atos Origin will make its full-year financial report on 10 March and says the results will include a $283 million charge against the value of goodwill carried at Atos KPMG Consulting. The charge is about one-third of the price paid by Atos Origin for the KPMG Consulting businesses in the UK and the Netherlands, but the company maintains the acquisition remains justified in meeting its strategic intent of driving top-line growth in the medium to long term.

Its acquisition of SchlumbergerSema was due to be confirmed at the end of the month.

5. TRIATON UNDER OFFER

Cap Gemini Ernst & Young, CSC, IBM and Deutsche Telekom subsidiary T-Systems are all in the running to buy Triaton, the IT services subsidiary of industrial group ThyssenKrupp, after final bidding closed early this month.

But India's Tata Consulting Services - previously rumoured to be in the line-up - said it had no intention of bidding for the business as a way of increasing its European presence.

ThyssenKrupp announced last May that it intended to sell Triaton along with other non-core subsidiaries. Formed in 2000 from the amalgamation of IT units within Thyssen, Krupp, Hoesch and Hoechst, Triaton is profitable, with revenues of about $422 million in 2002/3 and some 2,300 staff.

In a country market without a dominant independent and indigenous player, the new owner of Triaton's German business will become a force to be reckoned with among international IT services firms. ThyssenKrupp is expected to make a decision on the sale and detail its own ongoing need for IT services next month.

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