The Nordic region’s largest indigenous IT services provider, TietoEnator, saw shares plunge by over 10% on the back of an 18% fall in net profit in the first quarter, while shares in Ementor fell nearly 4.5%.

For the quarter ended March 31, 2005, TietoEnator recorded a net profit of 24.2m euros ($31.7m), down 17.7% on the same period the previous year, on net sales that increased by 7.3% to 408.1m euros ($534.2m), with acquisitions generating about 23m euros ($30.1m) of net sales. Organic growth totaled 1% in the first quarter. The Espoo, Finland-based company’s share price dropped SEK 25 to SEK 213 in trading on the Stockholm stock exchange.

Five of TietoEnator’s six business areas suffered a fall in operating profit when compared to the first quarter of 2004. The banking and insurance division was the worst affected, with earnings before interest and taxation falling approximately 31% to 4.9m euros ($6.4m). The company’s telecoms and media operation grew its operating profit by 23.8% to 15m euros ($19.7m).

Sales in TietoEnator’s home market of Finland fell 1.6% to 189m euros ($247.4m), equivalent to 46.3% of total revenue. The company’s acquisition of a number of German companies, including ITB AG, SESA AG, adfincon, and Inveos AG, helped boost sales in Germany to 24m euros ($31.4m), up from 9m euros ($11.8m) in the first quarter of 2004.

TietoEnator said IT services spending in the Nordic region had been slow to recover, and said pricing is very competitive on large deals. The company said it is reliant on winning new outsourcing deals as well as acquisitions for growth in 2005.

TietoEnator’s Nordic rival Ementor has also made a poor start to 2005. The group made an operating loss of NOK 77.9m ($12.5m), compared to a profit of NOK 7.3m ($1.2m) in the same period of the previous year, on revenue that fell 24.3% to NOK 971.9m ($156m).

Product sales, traditionally Ementor’s core business, suffered a 30.1% fall in revenue, although the segment still contributed 57.9% of total revenue. Consulting revenue fell 25.3% to NOK 213.9m ($34.3m), while service revenue increased by 9.1% to NOK 225.8m ($36.3m).

Oslo, Norway-based Ementor admitted that it lacks strategic focus, and said its highly complex business model has hampered its performance. The company said its four outsourcing businesses lacks critical mass, scalability and necessary efficiency and announced that measures will be implemented to stem the leakage of cash and commercial value. As a result, Ementor will reduce the scale of its activities.