Logica hammered by profit warning

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LONDON, England (CNN) -- Logica, whose software powers about half the world's mobile phone text messaging, was hammered after it issued a profit warning and said it would cut 700 jobs.

The British software group warned on Friday that revenue would be flat and earning per share before costs was expected to be "significantly" below last year's level as companies kept a tight control on information technology budgets, particularly in the mobile phone sector.

Logica's (LOG) stock plunged 21 percent to 234.89 pence in early London trading on Friday, while rival CMG (CMG) slid 8 percent to 150 pence. The company said the cost of overhauling its mobile phone messaging business and jobs losses would be £34 million.

"At group level we expect full year revenues to be little changed and earnings per share before restructuring costs to be significantly below last year,'' the company said in a trading update.

"While our IT services business is stable in a very difficult market, trading conditions at our mobile networks division have worsened considerably as the current half has progressed.''

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"(Telecom) Operators are striving to contain cash in the most difficult industry climate for a decade and have become less optimistic about the short to medium term outlook for MMS (multimedia messaging) revenues."

Investors were shocked by the latest admission that it had little chance of cracking the lucrative MMS market as mobile phone makers, like Nokia and Ericsson, flex their muscles. On Thursday, its stock dropped 10 percent after signing a deal with Spain's Telefonica to supply its software but did not include next generation messaging services.

Logica could be dumped out of the FTSE 100 index as its stock continues to fall out of favour because of its failure to win customers for MMS, which allows mobile users to send pictures, video and audio clips as well as text.

"Total Mobile Networks revenue for the second half will be substantially below the £161.7 million achieved during the first half," the company said.