The combined company, which will use the SysOpen name, made a combined operating profit of $21.3 million (E18.5 million) on revenue of $387.7 million (E337.5 million) in full-year 2002, and had 2,661 employees at the end of June.

Tietoenator Oy, the company’s closest competitor and the largest Nordic IT services vendor, made 2002 sales of $1.4 billion and has 12,400 staff.

SysOpen chief executive Arto Sahla, who will head the new company, told ComputerWire: IBM and EDS have made big inroads into the Nordic region, and the competition is getting tougher all the time. IBM has won big outsourcing deals with M-Real, Nordea and Finnair in recent months, and we hope to be able to better compete against them by combining with Novo.

Helsinki-based SysOpen is offering $2.18 (E1.90) in cash and 0.545 new SysOpen shares for each share in its larger peer Novo Group. Although the deal will give Novo shareholders a 70% stake in the combined company, Sahla said that it was SysOpen that approached Novo with the proposal. The offer opens on October 6 and runs to November 7.

The combined company will make the majority of its revenue from selling packaged applications for key vertical markets including the public sector, telecommunications, manufacturing and retail. The other three main business lines are bespoke software development, computing and network services, and hardware sales. The combined client roster includes TeliaSonera, Nokia, and Finland Post.

Conditions in the Nordic IT services market have been tough for the last three years.

Novo announced in March that it was planning to lay off almost all of its 2,300 staff for three months between May and December 2003. In the first six months of the year, Novo reported a 93% drop in net profit to $344,600 (E300,000) on sales that fell 0.5% to $174.6 million (E152 million). SysOpen grew its net profit to $1 million (E879,000) in the first half of 2003 compared to a gain of just $28,700 (E25,000) in the year-ago period, on sales that fell 10% to $15.6 million (E13.6 million).

This article was based on material originally published by ComputerWire.