Tietoenator chief executive Matti Lehti said that competition is particularly strong for outsourcing contracts, and in the manufacturing and logistics sector. Several players, national and global, large and small are trying to find a future role for themselves, he said.

Demand for consulting and systems integration projects, as well as the company’s proprietary systems for the banking sector, remained weak in the fourth quarter, although Lehti said this was partially offset by growing interest in outsourcing.

In the three months to December 31, 2002, the Helsinki, Finland-based company made a net profit of 19.4m euros ($20.7m) on sales that grew 14% to 358.2m euros ($383m). In the full-year period, TietoEnator posted a 68% decline in net profit to 63.9m euros ($68.3m), on revenue that grew 12% to 1.3bn euros ($1.4bn). TietoEnator’s headcount increased 17% to 12,418 at the end of December 2002, with its staff churn rate falling from 9% to 6%.

Lehti described a pent-up demand for investment in development projects in the financial services sector (15% of revenue), where sales grew 6% in the fourth quarter to 53.5m euros ($57m), and operating profit increased 21% to 5.5m euros ($5.9m) in the fourth quarter.

Revenue from the telecom and media sector (17% of sales) rose 56% to 60.5m euros ($64.7m), with operating profit up 98% at 5m euros ($5.3m). Lehti said that operators continued to focus on cost-cutting, and that Tietoenator’s deal with Ericsson to take over its 860-strong research and development activities in Sweden was symptomatic of this trend.

Contracts with public sector organizations have been the mainstay of most IT services companies in the last 12 months, and TietoEnator is no exception. Lehti highlighted strong demand from healthcare companies in Sweden, Norway and Denmark but added that the robustness of spending in the sector had attracted greater competition.

Fourth-quarter sales from the public sector grew 10% to 55.9m euros ($60m), although operating profit fell 11% to 7.2m euros ($7.7m). Sales to production and logistics companies – TietoEnator’s fourth main target vertical market with 17% of total revenue, grew 10% to 62.4m euros ($66.7m).

Sales of processing and network services (28% of revenue) grew 9% to 100.2m euros ($107m) with operating profit growing 28% to 11.5m euros ($12.3m). Finally, sales from TietoEnator’s resource management division, which includes its human resources and financial management applications, fell 2% to 46.6m euros ($49.8m) in the fourth quarter, with operating profit dropping 25% to 6.5m euros ($6.5m). Lehti noted a trend for service providers in this space to switch their applications to an ASP, or web-based delivery model.

Geographically, Finland was TietoEnator’s largest market in full-year 2002, with sales increasing 14% to 728m euros ($778m), giving it a 57% share of total revenue. Sweden was the second largest (26% of sales), although TietoEnator described it as its toughest territory with sales growing 4% to 329m euros ($352m). Norway accounted for 8% of full-year sales, Denmark 3%, and its non-Nordic operations accounting for just 6%.

Looking ahead, TietoEnator said it expects demand for tailor-made projects and repeatable solutions to remain modest in 2003. However, it expects continued demand for outsourcing engagements to help grow sales by between 12% and 14% in the first quarter, and by at least 10% in full-year 2003.

Source: Computerwire