Capgemini Reports Solid Revenue Growth But Plans Big Cuts In North America - InformationWeek

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Capgemini Reports Solid Revenue Growth But Plans Big Cuts In North America

Company will cut 200 jobs and close 19 offices in an effort to make its North American operations profitable.

IT consulting and systems-integration firm Capgemini on Wednesday reported strong first-quarter revenue growth, but warned that it plans to cut jobs and close facilities as part of a major restructuring of its weak-performing North American unit.

The Paris company said first-quarter revenue increased 16% year over year to $2.18 billion. Sales grew 3.7% over the previous quarter. New contract bookings during the period, however, fell 15% compared with a year earlier to $1.86 billion.

Capgemini officials said they're taking drastic steps under a program called Booster to revamp North American operations, which haven't been profitable for three years. "When there is a fire in the house, you have to take bold steps," chief operating officer Pierre Danon said in an interview.

Under the plan, the company will cut 200 mostly senior-level jobs in North America and close 19 offices. To take up the slack, Danon said he wants to increase the amount of IT work the company does for U.S. clients from its offshore facilities in India from 20% to 30%.

The moves will help the company slash its IT costs in North America by 30% and facilities costs by 45%, Danon says. All told, Capgemini will reduce its North American operating costs by $100 million. The company has about 8,000 employees in North America.

Danon says he's confident the plan will bring Capgemini's North American operations to profitability by 2006. Beyond that, he says the unit will grow by focusing on what he calls "our golden nuggets"--practices built around specific vertical industries such as utilities, insurance, and retail.

The restructuring doesn't mean Capgemini plans to back away from the North American market, Danon says. "We absolutely want to win in North America," he says. But, he cautions, "we cannot grow unless we are in a position to make a profit."

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