SBS is in the process of cutting 2,400 jobs at its under-performing domestic operation as part of its latest attempt to turn what is Europe’s fifth largest IT services organization into a consistently profitable business. The job cuts cost the company 155m euros ($193m) in its most recent quarter, but it said it expects severance costs to be lower in the second half of its fiscal year than in the first.
SBS’s revenue rose 8% to 1.39bn euros ($1.7bn) during the quarter, but new contract orders fell 12% to 1.36bn euros ($1.7bn), which SBS said was due to a smaller number of major awards.
A squeeze on margins hit its communications unit so that while sales rose 7% to 3.38bn euros ($4.2bn), operating profit declined by 75% to 27m euros ($33.7m). The company said its carrier networks business delivered most of its sales growth and there were flat sales in the enterprise networks business and a decline in the devices business. New orders rose 4% to 3.56bn euros ($4.4bn). Severance charges are expected to increase in the second half.
Motorola has been reported to have expressed an interest in the mobile networks business, only to be told that it must take all or nothing. With the proposed Alcatel-Lucent merger presenting all players with a huge challenge, the way could be open to Nortel Networks Corp to engineer a merger to create an equally muscular presence in the market.
