Oil services giant Schlumberger Ltd is looking for a buyer for its volume software business after announcing it will take charges of $2.9bn in its fourth quarter relating to severance costs and goodwill write-downs.
Schlumberger will take an after-tax charge of $2.9bn, which largely consists of a goodwill impairment charge relating to the Sema acquisition. It will also cut 1,600 jobs across all its activities in the US and Europe, resulting in a further after-tax charge of $77m. The cash impact of these charges will be less that $160m.
The news marks the latest set of problems stemming from New York-based Schlumberger’s $5.2bn cash takeover of Paris, France-based IT services provider Sema Group in March 2001. The rationale behind the much-criticized deal was to enable Schlumberger to take on larger contracts for its oilfield services clients, covering everything from running data collection processes through to desktop and applications management.
Although Schlumberger has since won new IT services deals with clients such as Shell, the integration of the Sema purchase has been far from smooth. Sema brought with it a large products business, built up through its troubled $4.7bn acquisition of customer care and billing systems vendor LHS Group in June 2000, and Schlumberger has struggled to fuse this into its IT services operations.
SchlumbergerSema spokesperson Ariane Labadens told ComputerWire that the company is rolling its software activities in the areas of smart cards, point of sale terminals, electricity meters, payment systems and telecoms software into a separately-managed division. Finding a third party to take it over either piecemeal or wholesale is one of the possibilities under consideration.
She said: The company realized that its consulting, integration and outsourcing activities had very different business models to its product sales. Labadens said that other options Schlumberger is considering for the products business are an initial public offering, or allowing third parties to acquire minority stakes in the venture.
The products that will be pooled in the new division include the Essentis software platform for payment card issuing, and the SemaVision CCB system, which supports almost 200 million cellphone subscribers worldwide, with clients including TIM SpA in Italy. Perhaps most significantly, the company’s smart card software and hardware business is now up for sale. SchlumbergerSema claims to have sold in excess of 2.5 billion smart cards to date, and along with main rival GemPlus SA, has enjoyed strong sales of cards for second-generation mobile phones.
Revenue from SchlumbergerSema’s volume products increased by 5% to $210m in the third quarter ending September 30, 2002. This part of the business improved its operating profit by 42% sequentially to $9m, and ironically, the company was bullish about its overall performance, pointing to strong sales of mobilecom cards, banking cards and improved productivity in its general smart card business.
Schulmberger said this week that in contrast to the sluggish performance of its oilfield services business, its IT services operations continue to improve. Looking ahead, the company said that this business will be expanded organically rather than through acquisition, and will be focused around the group’s core energy and utilities markets, plus several key industries such as the public sector in the UK, financial services in France and telecommunications in Italy.