Cap Gemini slashes jobs

June 26, 2001 Posted: 1054 GMT

LONDON (CNN) -- Europe's No. 1 computer services company Cap Gemini Ernst & Young plans to slash 2,700 jobs and its costs as business slows in the U.S.

In announcing the move on Tuesday, Cap Gemini also said it was reducing its full-year sales forecast to 9 billion ($7.8 billion) from 9.6 billion.

Shares in Cap Gemini (PCAP) plunged  as much as 21.5 percent to 86.85 in Paris trading. The shares are down almost 60 percent since peaking at 209.8 in January.

"Whilst bookings registered during the first months of the year were at a satisfactory level, activity in the group over the last weeks has experienced a marked slowdown," the company said.

Cap Gemini, which offers companies everything from computer hardware and software packages to management consultants, said it had experienced delayed and cancelled orders from customers in financial services, technology and manufacturing, especially in the U.S.

Cap Gemini is the latest leading light in the technology sector to issue a warning on earnings as businesses on both sides of the Atlantic scale back or delay spending on computers, software and related goods to weather the effects of the U.S. economic slowdown.

The company, formed in February last year when France's Cap Gemini bought U.S. consulting firm Ernst & Young for $11.3 billion, plans to "significantly reduce general expenditure" and said its restructuring would result in a first-half charge of 85 million.

Antonin Baudry, an analyst at ETC in Paris who cut his rating for Cap Gemini stock from "add" to "reduce", told Reuters: "The warning is worse than expected. Organic growth (for the year) at constant exchange rates should be 7 percent against 14 percent expected initially."

The company said that in addition to the job cuts, which have already started, some 700 other employees will be transferred as parts of the company are overhauled.

"Due to these measures, our operating margin in the second half should be between 8 percent and 9 percent provided there is no further significant deterioration in the economic environment," Cap Gemini said.

The French group said its first-half operating margin would be 6 percent on sales of 4.4 billion. The company will release first-half results on July 30.

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