MCN Direct Newswire

Vol. 2 No. 39, 20 October 2003

This issue is sponsored by:

Cedar Software and Mindjet

This issue news

1. IBM promises 10,000 new jobs
2. EDS proposes IPO for PLM business
3. Unisys grows services business
4. Getronics continues fightback
5. BearingPoint sets up services group in Dublin
6. Further information - feedback/forward to a colleague/unsubscribe

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1. IBM PROMISES 10,000 NEW JOBS

IBM says it will need 10,000 new staff next year, many of them in its key consultancy and services businesses. The company is basing its expansion plan on the strength of third-quarter results showing net profit up 38% at $1.8 billion, on revenues rising 9% to $21.5 billion.

IBM Global Services turned in the biggest percentage points growth and revenue in the quarter, showing a revenue gain of 17% to $10.4 billion. The group signed more than $15 billion in services contracts in the quarter and had an estimated backlog of $115 billion in orders at the close of the period.

IBM chairman and CEO Sam Palmisano said IBM needs "approximately 10,000 new positions" next year, in the key skill areas of high-value services, middleware technologies, Linux and open standards-based hardware and software.

He also said IBM will commit $200 million of its $700 million training budget to re-skill more than 100,000 existing staff.

Palmisano commented: "We are beginning to see signs that the economy has stabilised. As we look to 2004, more customers are expected to increase their investments in IT. Although it is too early to say that a rebound is at hand, we are confident that we will benefit from both a pick-up in IT spending and an economic recovery."

For the nine months to the end of September, IBM reported net profit of $4.9 billion, up from $2.6 billion a year ago, on revenues rising 10% to $63.2 billion.

2. EDS PROPOSES IPO FOR PLM BUSINESS

EDS is considering an initial public offering or the sale of a minority stake in its product lifecycle management (PLM) solutions subsidiary as it pursues its strategy of concentrating on core IT outsourcing business.

Michael Jordan, the EDS chairman and CEO behind the strategic shift made in June (MCN Direct 2-24), said: "A minority IPO or private offering in PLM Solutions would enable EDS to leverage the value of this key asset. By operating as a software company in a growing space, PLM Solutions will be able to focus solely on the PLM market, while in turn supporting EDS' sharpened focus on its core business."

PLM Solutions comprises a number of EDS applications and services geared to the product lifecycle. In fiscal 2002, it generated $138 million in operating profit and revenues of $879 million. In 2002, it contributed 4% of EDS' total revenues of $21.5 billion, but was the fastest growing business on 16% and the only one to achieve profits growth.

Tony Affuso, CEO of EDS PLM Solutions, commented: "We expect this alternative would enable PLM Solutions to be more agile in the market, make decisions more quickly and more effectively leverage our roots as an independent software company on behalf of our customers. At the same time, PLM Solutions would continue to be able to leverage the support and IT services expertise of EDS. It's a win-win scenario we are looking forward to."

EDS plans to complete the divestiture of a minority interest in PLM Solutions in the first half of 2004.

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3. UNISYS GROWS SERVICES BUSINESS

Unisys has reported an 11% gain in services revenue for the third quarter, underlining its move away from products towards business process outsourcing and managed services.

The company reported total third-quarter net profit down 4.7% at $56.2 million, on revenues up 9% at $1.5 billion. Services delivered revenues of $1.1 billion, up 11% on last year's comparable period, with technology showing revenues of $384.5 million, up 3% on the third quarter of 2002.

Profit margins across the company inched up from 7.2% in the year-ago quarter to 7.3%, although margins in the services business fell from 5.7% to 3.9%.

US revenues grew 11% to $684 million, primarily spurred on by federal government business, while international revenue rose 7% to $766 million, with growth in Europe offsetting a decline in Latin America and slight slippage in Asia-Pacific.

Unisys chairman and CEO Larry Weinbach said: "We are on track to achieve our strategic and financial objectives for 2003. While the global environment remains challenging, we are steadily enhancing Unisys' reputation in key growth areas such as business process outsourcing, managed services, security and high-end Intel-based servers.

"For the full year of 2003, we continue to look for targeted earnings per share of 77 cents on mid single-digit revenue growth."

For the first nine months, Unisys showed net profit up 9.9% at $147.2 million, on revenues gaining 5.4% to reach $4.3 billion.

4. GETRONICS CONTINUES FIGHTBACK

Amsterdam-based IT services group Getronics is struggling back to financial health, reporting a profitable third quarter and a successful bond offer that will refinance its existing debt.

Getronics was on the brink of collapse earlier this year but, after installing a new management team, began a slow process of recovery through job cuts, restructuring and the disposal of non-core assets.

Preliminary results for the third quarter show profit before tax and exceptionals of $4.6 million - reversing a loss of $12.8 million in last year's comparable quarter. Q3 revenue dropped 16.4% to $697 million, with services revenue falling from $565 million to $517 million. But services contributed 74% of total revenues, against 67.7% a year ago.

Getronics said "the vast majority" of countries performed on or above forecast in the quarter, and confirmed that its restructuring and recovery plans in Italy and the Netherlands remain on track. The company accounted for restructuring expenses of $3.5 million in Q3 while employee numbers fell 7.8% to 23,166.

During the quarter, Getronics disposed of two non-core assets: DigitalNet shares were sold for $27 million, resulting in a book profit of about $6 million; and shares in the South African-based IT company CS Holdings were sold for $3 million.

Getronics said its recent offer of $116 million convertible bonds due in 2008 was oversubscribed and that the net proceeds would be used to refinance its existing debt - the very problem that brought it close to collapse earlier this year.

5. BEARINGPOINT SETS UP SERVICES GROUP IN DUBLIN

BearingPoint has established a global services group in Dublin in a bid to provide European clients with IT outsourcing solutions.

The consultancy will initially recruit 20 professionals to form the group, but intends to increase that number to 150 during 2004.

The global services group will offer outsourcing solutions ranging from simple staff augmentation to full technology outsourcing and offshore and dual-shore development, giving clients staffing options coupled to complete project fulfilment.

BearingPoint Ireland managing director Paul Toner said: "The company is capitalising on Ireland's ability to offer highly qualified, skilled, technology professionals - the firm has historically looked to Ireland for reliable and consistent professional expertise."

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