The London-based services and software company said it had increased the number of planned job cuts to 2,200, from the previously announced 1,725. This means that the company will reduce its headcount by almost a tenth from the 24,000 it had in June 2002.

LogicaCMG gave no indication of which areas of the business will be hit hardest by the cuts, but the retrenchment in the second half of last year was across the board, including 485 job losses in its Wireless Networks unit.

The company said that further cost-cutting was required, with the IT services market showing no signs of improvement in the short term. In a similar tone to the negative outlook given earlier this week by Dutch IT services provider Getronics NV, LogicaCMG said in a statement: Demand in systems integration and consulting remains weak as customers focus on cost-reduction and maximizing returns from existing investments.

The merged company has adopted Logica’s financial calendar with the fiscal year ending June, so the first set of results cover the half-year period. In the six months to December 31, 2002, the company made a net loss of 458.3m pounds ($730m) that included restructuring costs of 7.7m pounds ($12m), goodwill impairment of 444.6m pounds ($708m) and merger transaction costs of 22.6m pounds ($36m). Revenue was 882.5m pounds ($1.4bn).

The company did not give a pro-forma comparison for the six months to December 31, 2001, but did offer a like-for-like comparison with the six months to June 30, 2002. On this basis, sales fell 6.6% from 944.9m pounds ($1.5bn), and its net loss widened from a loss of 295.2m pounds ($470m) during the period.

LogicaCMG chief executive Dr Martin Read said the company had experienced greater stability of pricing in its two main markets, the UK and Benelux region, and said clients are looking to work with a smaller number of proven suppliers. This echoes the rationale that the two companies gave for the merger last year. However, revenue from its Dutch operation fell 4% from the first half of 2002 to 204m pounds ($325m) in the second half on weakness in the telecommunications and public sectors. Revenue in the UK fell 13% sequentially to 313.7m pounds ($500m), with sales surprisingly down 15% and 5% in its energy and utilities, and industry and transport sectors respectively, despite a string of recent SAP services contract awards.

The company’s worst performances came in France and Germany – markets that Read observed: continue to weaken. Revenue from France fell 6% sequentially to 48m pounds ($76m), which included a 76% drop in its sales to the public sector to 1m pounds ($1.6m). LogicaCMG’s German business suffered from project delays and cancellations, and stripping out its recent acquisition of local player NordIT, sales fell organically by 10%.

LogicaCMG’s wireless software unit remains a principal target of scrutiny for the investment community, with the hope that the company’s merger will enable it to strengthen its position as a supplier of multimedia messaging software platforms. The Wireless Networks division reported a sequential 5% decline in sales to 160.9m pounds ($256m) in the second half of 2002, which was hit by 10% revenue drops for both its messaging and billing products.

The company claimed to hold a 20% share of the multimedia messaging platform market, but said that other market factors may hinder its future growth: Lack of standardization and interoperability, as well as availability of new handsets at realistic prices are further concerns, it said. However, LogicaCMG has also lost out on several large deals in competition with Nokia and Ericsson.

The company said that it now expects annualized cost savings from the merger to reach 80m pounds ($127m), up from previous expectations of 60m pounds ($96m), and said that 40m pounds ($64m) of this total will be achieved during 2003. One area in which the company may build up its workforce is its offshore software development operation in India, which is currently being utilized on projects with Credit Suisse First Boston and Britannia Airways.

Source: Computerwire