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Analysis of Capgemini's 2004 Business Results

Turning the Corner

But Big Write-offs Bleed More Red Ink to Bottom Line

PHOENIX, Feb 24 – Capgemini’s 2004 revenues rose 9% in uros (up 15% in U.S. dollars) to €6.3 billion ($8.3 billion), but big write-offs resulting from continued restructuring dropped €359 million ($474 million) of red ink to the bottom line.  Operating profit, fell to 58 million from 155 million in 2003.

The stock market evidently liked what it saw.  Undaunted by the company’s continuing losses, the Paris Bourse lifted the Capgemini shares by almost 8% to €28.30 following the release of its latest results (see the chart).  That’s because the operating income fell less than analysts had feared, and revenues and new contract sales were higher than expected.


Strong European, SMB Results

Meanwhile, Capgemini’s European operations seem to be going great guns again.  Their operating income rose from 12 million in the first half of the year, to 110 million in the second half, and “is starting 2005 with renewed operational confidence,” the company said. 


Outsourcing Growth Adds to Profit Woes, For Now…

Outsourcing is also gaining share of Capgemini’s business.  It now accounts for one-third of the total (up 21% over 2003 as reported in euros, and up 26% in U.S. dollars).  



The company is hoping that as outsourcing matures, and the big deals’ upfront costs begin to wane, they will correspondingly drop larger amounts to the bottom line.  The rapid growth in its SMB business will also have a beneficial profit effect.


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Happy bargain hunting

Bob Djurdjevic

For additional Annex Research reports, check out... 

2005 IT:  Capgemini: Turning the Corner (Feb 2005);  IBM Servers to Grow Again (Feb 2005);  Carly's Fickle Fans (Feb 2005);  CSC: Gearing Down on Purpose (Feb 2005);  EDS: Grossly Overpriced Stock (Feb 2005);  IBM Historical Update: 2004 Shot in the Arm (Feb 2005); New HeadTurners Series #1 (Feb 2005); IBM: A Crescendo Finale! (Jan 2005); Accenture: Strong Finish, Better Start (Jan 2005); Annex Coverage 2004: IT Services Dominate (Jan 2005)

2004 Cap: Capgemini: Revenue, Stock Soars (Nov 2004); Capgemini: A Takeover Target? (Oct 2004); Capgemini Stock Plummets on Unexpected Loss (Sep 2004);  Capgemini: Texas-size Home Run (May 2004); Capgemini: Another, Smaller Loss (Feb 2004)

2003 Cap: Biggest Feather in Cap's Cap (Dec 2003); The 10-year Glitch (Mar 2003) 

A selection from prior years - Cap

Analysis of CGE&Y 2001 Results (Feb 21, 2002), Analysis of Cap Gemini Ernst & Young 2000 ... (2001),  CGG 1999 Preliminary (Mar 10, 2000),  CGG Annual Report 1998 (June 18, 1999),  CGG: The Most Improved (1998)

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Volume XXI, Annex Bulletin 2006-05
February 24, 2005

Bob Djurdjevic, Editor
(c) Copyright 2005 by Annex Research, Inc. All rights reserved.
e-mail: annex@djurdjevic.com

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