MCN Direct Newswire
Vol. 3 No. 31, 13 September 2004
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Capgemini collapsed in the first half of 2004 as its net losses plunged to 135 million euros (£92.2 million), well below analysts' expectations. Revenues for the half-year also fell 1.8% to 2.9 billion euros compared to the first half of 2003 - though Capgemini consoled itself with a revenue rise of 8.8% on the second half of 2003 and claimed "revenues are now well underway to resuming a growth track".
In line with this claim, the company said bookings in the half rose 57% to 5.9 billion euros.
The scale of the first-half loss exposes a multitude of problems. Capgemini said its outsourcing business - 28% of first-half revenue - was knocked back by the "tremendous sales effort" needed to win major deals such as the £3 billion Inland Revenue Aspire contract, while technology services - 37% of revenues - was hampered by pricing pressure and "overruns on a number of projects signed in the difficult market conditions of the past few years".
Capgemini's consulting business - 18% of revenue - is slowly returning to growth, with Sogeti-Transiciel - 17% of revenue - showing the highest operating profit across the group.
Making matters worse, first-half revenue from North America dropped 22% in the first half, the UK was weak in the first quarter and the company took a one-off charge of 30 million euros to drop the Ernst & Young name and rebrand.
In an effort to resolve its problems Capgemini will close or dispose of heavily loss-making non-strategic units, take measures to 're-energise' the North American operations and make further cost cuts in its technology business.
A management shake-up is also expected, with chief financial officer William Bitan immediately replaced by Nicolas Dufour, previously responsible for central and southern Europe, and chief executive Paul Hermelin saying he intends to strengthen the senior management team in the near future.
EDS is planning to axe a further 20,000 jobs from its worldwide staff roster of 122,000 in an effort to return to profitability.
The job cuts - 16% of the total workforce - will be made over the next 24-30 months. EDS has not yet decided where and when the jobs will be lost, but the UK is likely to be affected.
EDS is moving back to profitability after a period of turmoil that recently saw its long-term credit rating downgraded by Moody's Investors Service (MCN Direct 3-28).
CEO Michael Jordan - who was hired in place of Dick Brown early last year to lead the recovery - said the staff cuts are essential to meet a target of reducing costs by 20%, or about $3 billion a year.
EDS is also carrying out a transformation programme that will streamline its supply chain and purchasing practices, and improve capacity management at its sites worldwide.
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US-based science and technology group Science Applications International (SAIC) has hit problems in its proposed acquisition of PA Consulting.
SAIC began preliminary talks with PA back in June (MCN Direct 3-23), but the deal has been delayed by a longer than expected period of due diligence.
While neither company would comment on the particulars being examined as part of this, PA claims the acquisition will still go ahead. If so, the benefits are expected to be mutual, with PA extending its geographic reach further into the US and SAIC able to build a stronger presence in the UK and continental Europe.
SAIC is expected to merge its small management consulting business with that of PA, retaining the PA Consulting brand.
While the acquisition would add value to SAIC, company comparisons make the deal relatively small for the US group. SAIC reported record revenue of $6.7 billion (£3.7 billion) for fiscal 2004 and has 43,000 employees worldwide, while PA has revenues of about £400 million and 3,000 staff in 35 countries.
Both companies are employee owned, suggesting that any acquisition of PA would give staff a windfall as they swap shares for cash.
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Business transformation consultancy Axon is pursuing international growth on the back of a strong financial performance in the UK.
The consultancy, which works with $1 billion-plus corporations that have SAP as their strategic platform, said its international revenue increased 13% in the first half of 2004 to £7.2 million, encouraging the pursuit of further opportunities in the Middle East, Asia-Pacific and the US.
In total, first-half results showed significant gains, with pre-tax profit up 43.6% at £2.9 million, on revenue up 8.4% at £26.7 million. The company's headcount rose 20% to 465, with further recruitment expected in the second half of 2004.
In a relatively flat market, these results suggest Axon is winning market share in the UK as it prepares an offensive further afield.
Describing the firm's plans, chairman and CEO Mark Hunter said: "In 2001, we set out a strategy to become a business transformation consultancy that manages major programmes of change for large corporations that have chosen SAP. It is now time to move to a new phase of growth through delivering even more substantial programmes for our customers.
"In 2005, we will be focused on broadening our customer proposition in our current and new vertical markets, as well as aggressively pursuing our international growth plans."
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Atos Origin has consolidated its consulting businesses within Atos Consulting, a 2,500-strong global organisation aimed at meeting the needs of international clients.
The new business integrates the European operations of Atos Origin, Atos KPMG Consulting, Nolan Norton and Atos Odyssee. It will focus on business and IT strategy, operations transformation, financial management and people and change.
The rebranding of Atos Origin's consultancy activities coincides with the company's first-half financial report, which showed distinct improvement following its acquisition of Sema in January 2004.
Net profit for the six months to 30 June rose 43% to 112.2 million euros (£76.6 million) on revenue up 72% at 2.7 billion euros.
Looking forward, Atos Origin chief executive Bernard Bourigeaud said: "We remain optimistic that a modest but sustainable recovery in the market will occur next year. However, since the start of this year we have been cautious about the prospects for IT services in Europe in 2004 and we continue to believe that reported revenues will be stable on a constant scope and exchange rate basis." .
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