IT services firm Getronics NV plans to axe 1,400 people or as many as 6% of its workforce after warning that profits for the full year period will be lower than previously expected.
Amsterdam, Netherlands-based Getronics said it will take a 45m euros ($45m) charge in the full year to cover the staff cuts at its operations in Italy, the Netherlands, Spain, France and Mexico by June 2003, and admitted that operating profits for the full year will be down to 110m euros ($110m) before restructuring expenses.
The cuts come in addition to the 1,450 redundancies already completed at the end of 2001, and Getronics said it expects the move to enable the company to save 85m euros ($85m) annually and ensure profitability during 2003.
Consulting services continue to struggle and the company said that this is where it had cut back to meet current demand. However it said a recovery would not take place until the second half of 2003, although a meaningful recovery would not occur before 2004.
At the same time, Getronics said it expects to take further goodwill impairment against its investments, which include its $2bn acquisition of Wang Global in June 1999. Getronics has been plagued with bankruptcy rumors during 2002 as a result of its huge debt mountain, which stood at 619m euros ($619m) at the end of 2001. And the company may have to reconsider its plan not to make a debt-for-equity swap to solve the debt crisis.
Consolidation is widely expected to continue in the IT services market, and Getronics stands as one of the biggest bargains to be had. With the company’s share price falling 25% on the latest warning, Getronics is valued at just 272m euros ($272m) on the Amsterdam Stock Exchange, or 15 times less than its annual revenue of 4.15bn euros ($4.15bn). This would make it an attractive takeover target to firms like Unisys Corp, which directly compete with Getronics in the areas of network services, reselling and outsourcing, and more importantly Unisys has aspirations to grow as a major IT services provider, competing on more level status with hardware and services peers like Hewlett-Packard and IBM.