MCN Direct Newswire

Vol. 5 No. 4, 13 February 2006

This issue is sponsored by:

Maconomy

This issue news

1. EDS plans offshore expansion
2. Parity names Alwyn Welch as chief executive
3. Capgemini swallows £30m pharmaceutical contract
4. CSC revenues fall in Europe
5. Atos Origin makes final sell-off
6. Further information - feedback/pass on to a colleague/remove from mailing list

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1. EDS PLANS OFFSHORE EXPANSION

IT services giant EDS is planning to double its offshore presence in a bid to improve profit margins by shifting work out of the US.

Announcing a financial turnaround in 2005, CEO Mike Jordan said EDS intends to buy companies in low-cost countries with a view to doubling its offshore headcount - currently 14,000 - by 2008. Expansion is most likely in India, where EDS employs 2,800 people, and China.

After its financial collapse at the end of 2003, EDS has been stabilising and restructuring for growth. It closed 2005 ahead of Wall Street expectations, with net fourth-quarter profit more than doubling to $112 million (£64.3 million) on revenue up 1% at $5.2 billion. Net profit for the year was down 5% at $150 million, on revenue flat at $19.8 billion.

Jordan commented: "EDS made significant progress in 2005, financially and competitively. We dramatically improved our position in the market, addressed legacy overheads and set the foundations for sustainable, profitable growth. Our success in the landmark General Motors re-compete, ongoing improvements on the US Navy contract and progress in building and deploying our Agile enterprise platform give us confidence that our momentum will carry into 2006."

2. PARITY NAMES ALWYN WELCH AS CHIEF EXECUTIVE

IT services group Parity has appointed industry veteran Alwyn Welch as its chief executive - though his arrival this week is not without hazards as Parity is being stalked by a potential predator.

Welch joins Parity from Unisys, where he has worked since November 2004 as general manager of the UK, Middle East and Africa, and managing director of Unisys UK. Before joining Unisys, Welch spent much of his career in executive roles at Capgemini and was previously a member of the executive board of Logica.

In his new role he will be responsible for the day-to-day running of Parity. He will work alongside executive chairman John Hughes, who will continue to focus on the rebuilding programme aimed at returning the company to profitability.

One added dimension is that since late 2005, an outside investor has amassed a tranche of 23.5% of Parity's share capital. Precise details of the beneficial owner of these shares are not clear - but Spearhead, a small North American IT services firm, said in a London Stock Exchange announcement on 9 January that it had acquired 23.35% of Parity's issued share capital.

The statement added: "Spearhead has held discussions with the board and advisors to Parity and is considering the possibility of making an offer for all of the outstanding share capital of Parity. However, Spearhead currently has no firm intention to make such an offer."

On 7 February, Parity said in a regulatory statement that it had received notification that Swiss-based financial companies Dominick Company and Dominion Holdings were the beneficial owners of 23.5% of its shares and that they were supportive of the company's management.

The relationships between the parties are unclear, but the announcements have triggered the Takeover Panel to rule that Spearhead must, by noon on 3 March, either announce a firm intention to make an offer for Parity or announce that it does not intend to do so.

Parity has made no further comment, but is known to be talking to shareholders with a view to strengthening its balance sheet equity. As at 31 December 2005, the company's net debt was £20.5 million, an increase from £15.5 million on 30 June 2005.

3. CAPGEMINI SWALLOWS £30m PHARMACEUTICAL CONTRACT

Capgemini has won a £30 million, five-year contract to transform and support the IT infrastructure of pharmaceuticals giant Lilly across 48 countries in Europe, the Middle East and Africa.

The contract begins this month and requires Capgemini to work with Lilly to transform and innovate IT services as well as support networks, servers and 16,000 PC and mobile users across the region. Capgemini will deploy its Rightshore sourcing model on the contract to provide development and outsourced services.

Lilly said it chose Capgemini on the basis of its commitment to help the company transform its IT delivery model, its robust proposals for governance in a complex multinational environment and its genuine partnering approach.

Rob Lamb, manager of infrastructure operations for Lilly in EMEA, added: "Innovation and transformation are baked into this deal. An innovation board, jointly staffed by Lilly and Capgemini personnel, will be established to ensure that both parties to the contract share the rewards from it. I am confident that the robust governance will ensure a mutually profitable relationship under which we are both motivated to achieve success."

4. CSC REVENUES FALL IN EUROPE

CSC is sprinting towards the close of fiscal 2006, but with little help from Europe where third-quarter revenue, hit by currency fluctuations, fell 5% to $1 billion (£573 million). CSC blamed the impact of currency changes as well as continued soft demand for shorter-term activities in Europe.

Overall, CSC turned in a strong quarter with net profit up 29% at $203.5 million on revenue rising 3% to $3.6 billion. The sources of revenue growth during this period were primarily its US federal government and US commercial operations - the latter driven by outsourcing wins and continued improvement in the North American consulting and systems integration markets. CSC's Australian and Asian operations also contributed to revenue growth.

For the first nine months of the fiscal year, net profit rose 9% to $434.6 million, on revenue up 5% at $10.7 billion. Business awards totalled $3.1 billion in the third quarter and $9.3 billion for the nine months.

Commenting on the results, CSC chief executive Van Honeycutt said: "Our improved profitability is a result of our operational emphasis on improving efficiency and execution to meet client demand, as well as continued attention to the allocation of capital to opportunities that will result in appropriate returns."

Honeycutt forecast fourth-quarter revenue of $3.8 billion and full-year revenue of $14.6 billion.

5. ATOS ORIGIN MAKES FINAL SELL-OFF

Atos Origin has agreed to sell its operations in the Middle East to local management, concluding a two-year divestment programme of non-core assets including its Nordic division and the Cellnet business in the US.

The Middle East operation is based in Bahrain and will continue to trade under the Atos Origin name, supporting the company's international clients in the region. The operation became part of the group when Atos merged with Origin in 2000. It has a successful track record in implementing IT solutions, particularly in the oil and gas sector, but works predominantly with local rather than international clients.

Commenting on the sale, Atos Origin chairman and chief executive Bernard Bourigeaud said: "This disposal takes to almost €500 million the annualised revenues of businesses that we have divested since the acquisition of Sema in January 2004. The divestment programme is effectively complete and we are fully focused on achieving our commercial and strategic objectives."

Atos Origin has published preliminary results for 2005 showing a revenue gain of 4% to €5.5 billion (£3.8 billion). Consulting revenue rose 12% to €449 million, with systems integration rising 6% to €2.3 billion and managed operations up 2% at €2.8 billion.

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Written by Sarah Underwood. Copyright 2012 PMP (UK) Ltd.