Cap Gemini to cut 5,500 jobs

LONDON, England (CNN) -- Cap Gemini Ernst & Young, Europe's largest computer services company, plans to cut another 5,500 jobs in an effort to improve operating margins.

Cap Gemini said on Thursday it plans to slash up to 3,000 back-office positions and 2,500 other posts, mainly in telecoms and financial services. The company also reogranised its business into three sectors -- consulting, IT and outsourcing -- in an effort to boost sales.

"The combination of these actions together ... will enable CGE&Y to restore profitability and market success,'' the company said in a statement.

MORE STORIES • Cap Gemini slashes jobs  • Cap Gemini profit rises  • Terror attack whacks Cap Gemini  • Cap Gemini cuts more jobs

Chief Executive Paul Hermelin, in an interview with French newspaper Le Echos, said: "Overall the 5,500 job cuts must lead to an increase in operating margin to 8.5 percent from 7.4 percent."

Cap Gemini, like its rivals, has been under pressure to slash costs as many customers choose to curtail spending in preparation for slower economic growth.

The company, which is heavily exposed to the slowdown in the United States since it acquired consulting firm Ernst & Young two years ago, announced 2,500 job losses in December, taking the total for last year to 5,400. The company had hoped that would enable it to save about 800 million euros ($715.6 million) annually.

Its stock has fallen more than 50 percent this year and closed at 42.75 euros on Wednesday. Cap Gemini, which offers companies everything from computer hardware and software packages to management consultants, had been trading at 340 euros in March 2000.

Investment bank Merrill Lynch told its clients earlier this month to "sell" the stock, setting a price target for shares of 36 euros. Merrill said Cap Gemini needed to fire more than 5,000 workers to meet earnings estimates. (Full story)

Hermelin also said second-quarter sales "like sales of the following two quarters" would be "equivalent to that of the first quarter." Cap Gemini had sales of 1.87 billion euros in the first quarter.