Cap Gemini lowers revenue forecast, sets layoff plans

Cap Gemini Ernst & Young LLP Tuesday joined the ranks of IT and management consulting firms that are making cutbacks, announcing plans to lay off 2,700 of its 60,000 employees as part of a wider cost reduction effort being driven by a “marked slowdown” in new business.

The Paris-based company also lowered its revenue forecasts for both the first half and the year as a whole. It revised its revenue target downward to about US$7.8 billion, six per cent below the goal of $8.3 billion set in January. First-half revenue is now expected to come in at about $3.8 billion.

Cap Gemini Ernst & Young said its bookings have slowed significantly in recent weeks due to “the phasing, delay or even cancellation of a number of important projects” by technology users. Companies in the financial services, manufacturing and high-technology industries in the United States are among the users that have been cutting back on their spending plans, it added.

The 4.5 per cent workforce cut will mainly affect Cap Gemini Ernst & Young’s operations in the United States, the United Kingdom and the Nordic countries of Europe, as well as its telecommunications consulting unit on a worldwide basis. The company said the telecommunications sector “has continued its downturn in all countries where it represents a notable part of [our] revenues.”

Cap Gemini Ernst & Young, which was formed last year when Cap Gemini Group SA bought the consulting business of New York-based Ernst & Young LLP, also detailed several other cost-cutting measures today. Those steps include a planned transfer of 700 support workers to customer-facing jobs and the delay or slowdown of some market development initiatives that “are non-priority in the current environment,” the company said.

About 60 per cent of the consulting firm’s revenue is generated in Europe, with 35 per cent coming from users in the United States, according to its annual report for last year. Cap Gemini Ernst & Young said it plans to report provisional results for the first half of this year on July 30, with the figures due to include a restructuring charge of about $73 million.

Rick Perera of the IDG News Service contributed to this report.