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Logica, CMG in merger talks
LONDON, England (CNN) -- Logica, Britain's biggest computer services group, is in merger talks with Anglo-Dutch rival CMG to cut costs as customers delay and cancel orders. "In addition to offering the scope for significant operating cost savings across the combined business, a merger would create one of Europe's largest quoted IT services businesses and a leading company in mobile messaging software," Logica said on Tuesday. Logica (LOG), along with rivals like Cap Gemini Ernst & Young (PCAP), has seen demand for computer services decline as customers delay orders in response to sluggish economic growth. At the same time, Logic and CMG's stranglehold as the power behind text messaging on mobile phones has been broken by manufacturers, as Nokia and Ericsson write their own software to power the latest incarnation, multimedia messaging. The proposed "all-share merger" would result in Logica shareholders owning 60 percent and CMG [CMG] investors owning 40 percent of the combined group, the two companies said. Logica has issued a string of warnings over the last year, the last in September as it posted a 25 percent drop in profit and said it saw no end to the global technology spending slump. Logica's stock, which has fallen more than 80 percent this year, slipped 0.6 percent to 124 pence in London trading early on Tuesday. CMG's stock soared 11 pence, or 27.5 percent, to 50 pence. Martin Read, currently the chief executive of Logica, is in line to become CEO at the combined group.
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