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"It has been a difficult time to be an IT company recently," admits Steve Vaughan, CEO of UK IT services company Synstar - and a particularly difficult time to be a European IT services company, judging by the latest round of financial results in the sector.

Synstar suffered a 7% fall in revenue for its second half of 2002 to £109.9 million ($170.4m). Yet, as if to underline the depression in the sector, such a performance exceeded Synstar's own expectations and outperformed some of its peers. The company is seen to have done less badly than some other IT services companies because of its expertise in business availability services, a market that has shown comparative signs of life with the increased threat of terrorist attacks. Revenue may be down across the board but operating profits from higher-margin back-up and recovery services grew by 22%.

One of those companies suffering even more than Synstar is UK IT services organisation Xansa, where interim sales fell 14% to £232.5 million ($360.4m). Xansa, formerly known as FI Group, has had a turbulent year so far. It is reorganising its business and will lay off up to 430 people by February 2003. A rare bright spot has been the company's relative success in business process outsourcing services.

Meanwhile, Scandinavia's over-populated IT services market saw fresh signs of consolidation in December 2002. WM-data of Sweden established a wide-ranging co-operation with its Danish counterpart, DMdata, which analysts saw as paving the way for a possible merger in 2003. WM-data may be one of the region's biggest homegrown IT consultancies but it has endured hard times of late, with sales cut almost in half in the September 2002 quarter to SEK1,475 ($162.3m). The company blames its woes on excessive competition in the Nordic region and has launched a fresh cost-cutting drive.