Cap Gemini cuts more jobs

December 13, 2001 Posted: 1345 GMT

LONDON (CNN) -- Cap Gemini, Europe's largest computer services company, saw its stock fall sharply after announcing new job cuts and the retirement of its chief executive.

Chief Executive Geoff Unwin said late Wednesday Cap Gemini planned to shed 2,500 jobs, bringing the total cuts for the year to 5,400, in an effort to save some 800 million ($715.6 million) annually.

Unwin also said he was due to retire by the middle of next year with Chief Operating Officer Paul Hermelin taking over his position in early January to ensure a smooth transition.

Cap Gemini's stock dropped 4.6 percent to 76.80 in midday Paris trading on Thursday. The company has lost more than half of its value this year.

Unwin said Gemini, which is heavily exposed to the slowdown in the United States since it acquired consulting firm Ernst & Young last year, stood to post 2001 sales below most analysts' forecasts and an operating margin – the percentage difference been sales and costs -- of five percent, down from 10.1 percent in 2000.

"We expect revenues for the year to be close to 8.4 billion, reflecting the difficult economic conditions prevalent through the second half," Unwin told Reuters.

"For the operating margin we are happy with the market consensus around five percent, driven by cost reduction programmes," he added.

Wednesday's forecasts disappointed analysts hoping for signs a turnaround was near for the firm whose business has been hit by slowing IT spending in the U.S. and Europe.

ING Barings analyst Francois Deliot told Reuters: "Sales of 8.4 billion are below the market consensus of 8.5 billion and an operating margin of five percent is disappointing. There are no real reasons to be optimistic."

Although Unwin said it was difficult to give an accurate forecast for 2002, he predicted revenue would slide in the first half before picking up in the second half.

Sales of 8.4 billion for this year would mean a 22 percent increase from 6.9 billion last year. Sales dropped 1.8 percent in the third quarter of 2001, bringing turnover for the nine months to 6.41 billion.