1 May 2003 Europe’s biggest services company Cap Gemini Ernst &Young has posted another fall in revenues for the first quarter of 2003.

Sales in the three months to the end of March fell to EU1.56 billion, down 17% from the EU1.87 billion posted in the same quarter a year earlier. However, the company suggested that the revenue fall was exaggerated by adverse exchange rate fluctuations, particularly the continuing decline in the value of the US dollar.

At constant exchange rates, sales were down by just 10%.

However, the company emphasised a 20% increase in bookings in the first quarter to EU2.07 billion, up from EU1.74 billion achieved in the final quarter of 2002. CEO Paul Hermelin also re-emphasised his aim of increasing the company’s operating margin to 5%, a move which cheered investors.

Cap Gemini has been hit particularly hard by the technology spending downturn, which struck almost as soon as its EU11.5 billion acquisition of the consulting arm of accountant Ernst &Young was agreed in May 2000.

Demand for the kind of enterprise application implementations that E&Y specialised in has fallen by more than almost any other sector in the computer services industry. Furthermore, partly as a result of that acquisition, CGE&Y missed out on the one area of the services business that has remained buoyant, outsourcing.

CEO Hermelin, installed in December 2001 with a brief to turn the struggling company round, has renewed its focus on outsourcing, although he will have an uphill struggle to put the company in the frame for some of the ‘mega-deals’ that are currently being concluded.