MCN Direct Newswire

Vol. 2 No. 41, 3 November 2003

This issue is sponsored by:

Apama, InterSystems, Sage and Nimbus

This issue news

1. EDS cuts deeper after third-quarter collapse
2. PA reshuffles top management
3. Geoff Unwin surfaces at Liberata
4. LogicaCMG buys Dutch BPO business
5. Accenture wins Reuters IT services contract
6. Further information - feedback/forward to a colleague/unsubscribe

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1. EDS CUTS DEEPER AFTER THIRD-QUARTER COLLAPSE

EDS is planning a further 2,500 job cuts after it made a third-quarter net loss of $0.6 million.

The loss partly reflects the adoption of new accounting rules, which created a $1.42 billion charge against earnings in the quarter, and reverses a net profit of $86 million in last year's comparable period.

EDS' revenue for the third quarter fell 1.8% to $5.2 billion, with base revenue excluding revenue from former parent GM rising 7% to $4.7 million and GM revenue falling 7% to $546 million.

The escalation in job cuts from the 2,700 announced in June (MCN Direct 2-24) to a total of 5,200 by the end of 2004 - 4% of EDS' global workforce - is expected to generate annual savings of $330-360 million, up $100 million on prior expectations.

EDS chairman and CEO Mike Jordan said: "We continue to implement our comprehensive transformation plan, covering all aspects of the business. As a result, we are much better positioned to compete effectively for business in our pipeline. We have also streamlined our sales process, focusing the company's resources on its most strategic contract opportunities, where we are seeing an improved win rate."

EDS signed $3.4 billion worth of contracts in the third quarter, up from $3 billion a year ago. Signings for the first nine months were $9.7 billion compared to $16.4 billion in the 2002 period. EDS said the drop reflected a "narrower focus on qualified sales pursuits".

The company said revenue from its consultancy subsidiary AT Kearney dropped 26% in the quarter to $192 million, with PLM Solutions up 8% at $212 million.

IT outsourcing accounted for 56% of third-quarter revenues, applications development 20%, business process outsourcing 13%, and IT consulting 3%. AT Kearney and PLM Solutions each contributed 4% of the total.

In geographical terms, revenues in the Americas fell 3% to $2.3 billion, the EMEA region rose 4% to $1.4 billion - due to higher contract signings in the financial sector - and Asia was down 10% at $246 million.

* AT Kearney has elected Brussels-based HL Henner Klein as its CEO for a three-year term. He will assume the post on 1 December, taking over from Dietmar Ostermann who will relocate to ATK's New York office. Klein will be based in Brussels with an office at headquarters in Chicago. He is currently leader of ATK's northern Europe profit centre and a member of the company's board of directors.

2. PA RESHUFFLES TOP MANAGEMENT

PA Consulting Group has made changes to its senior management team, saying it needed to strengthen its structure and bring through a new generation of leaders "to benefit from the market upturn we are beginning to see".

The changes take effect on 1 January 2004 and will see executive chairman and CEO Jon Moynihan cede his CEO role to chief operating officer Bruce Tindale, while remaining executive chairman. Tindale has been with PA for 26 years and has been COO since 2000.

Also moving up are Andrew Hooke, who will become group head of government services; Alec MacAndrew who will be group head of technology; John Buckley who will become chief operating officer of PA Ventures; and Todd Filsinger who has been named head of PA's energy practice and deputy head of its strategy and industries group.

Moynihan explained: "PA has withstood the down-market of the past three years and is in an excellent position to benefit from the upturn we are beginning to see. PA will be facing a number of new issues in 2004, which as executive chairman I will need to focus on - the need to refine longer-term strategy, the need to work on creating and realising value in our rapidly maturing Ventures, and the need to implement a successful longer-term succession plan for the top posts in the company. For all these reasons, this is the right time for me to pass on the CEO baton."

Tindale will focus on driving PA's business forward in its core areas of management and IT consultancy, particularly in the US, which is PA's second largest market.

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3. GEOFF UNWIN SURFACES AT LIBERATA

Former Cap Gemini Ernst & Young CEO Geoff Unwin, who stepped down last year, has returned to the IT services market as non-executive chairman of business process outsourcing (BPO) specialist Liberata.

Unwin is joined at Liberata by two additional non-executive directors: Greg Lock, formerly global general manager of IBM's industrial sector; and Tony Hobson, deputy chairman of Northern Foods and a non-executive director of HBOS.

These high-profile appointments follow a year of financial growth during which US-based private equity investment firm General Atlantic Partners invested $94.3 million in Liberata and paid $157 million to secure a 64% stake in the company.

Liberata's latest financial results show a 22% gain in revenues of $305 million for the year to 31 May and pre-tax profits up 25% to $31 million.

The company highlighted seven major contract wins in the year, through which about 1,000 employees transferred to Liberata.

CEO Glenn Timms commented: "Our 22% top-line growth was entirely organic and was complemented by significant additions to our talent base. Our order book is strong and we have further developed our pipeline."

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4. LOGICACMG BUYS DUTCH BPO BUSINESS

LogicaCMG has boosted its business process outsourcing (BPO) operations through the acquisition of a large part of Experian's BPO business in the Netherlands.

The transfer of 140 Experian BPO employees to LogicaCMG is a bonus as the company challenges analysts' perceptions that it is weak in the outsourcing and BPO markets.

Experian has moved a large portion of its BPO work in the financial services sector to LogicaCMG as part of a strategy in the Netherlands to focus on its core global businesses of providing information services and decision-making processes for financial risk management and marketing.

Neither the financial terms of the acquisition nor the revenues generated by the Netherlands' business were disclosed.

Commenting on the deal, managing director of LogicaCMG managed services, Reinoud Drenth, said: "The offering of BPO activities with application management means we can offer clients not only a structural cost reduction, but also a higher service level."

* LogicaCMG has secured a leading role in the Ministry of Defence's Skynet 5 programme to develop an advanced satellite communications service for the British armed forces. As part of the Paradigm Secure Communications team, LogicaCMG is expected to earn $135 million from systems development and support over the 15-year life of the contract.

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5. ACCENTURE WINS REUTERS IT SERVICES CONTRACT

Accenture and Reuters have signed a global IT services agreement under which Accenture will support the systems integration of Reuters products worldwide and service some of the information company's existing systems integration contracts.

The agreement includes the transfer of 70 Reuters employees in Europe to Accenture, effective from 1 November, and will allow clients of both companies to access Reuters' financial applications and content as well as Accenture's business consulting, IT and business process outsourcing (BPO) capabilities.

Reuters said in February that it intended to exit the systems integration services business to focus on core information services, and believes customers' experience of Accenture made it a natural partner to take on the role of systems integrator.

Managing partner of Accenture's capital markets practice William Cline noted: "Teaming with a global leader in financial information and applications enhances the portfolio of products and services we can provide to our clients and will enable us to broaden our BPO capabilities in the financial markets sector."

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