“Notably tepid” European market drags down Atos and Capgemini

Europe's two largest IT service companies both reported revenue declines for the first half of the year today, reflecting weak IT spending on the continent. 

Capgemini, Europe's largest IT services supplier, suffered a 2.3% drop in revenue for the first half of the year, down to €5.0 billion. 

UK and Ireland sales dropped 2% to €1.0 billion during the period, while revenue in the company's native France shrank by 2% to €1.1 billion. 

In the US, though, revenue grew 0.5% to €1.0 billion.

Atos, meanwhile, saw revenues drop by 0.6% to €4.3 billion for the first half of the year, as growth in the US and UK was offset by declines in France and Germany.

Revenue from UK and Ireland, which is Atos' largest market, grew 6% in the first six months of the year, up to €833 million. During the period, major managed services contracts with the Nuclear Decommissioning Authority and EDF Energy started to pay in. 

The US is Atos' smallest market, but revenue from the region grew 15% to €312 million during the period. 

However, revenue in Germany dropped 5% to €809 million and in France by 10% to €514 million. 

The German unit was impacted by the insolvency of Neckermann, a major retailer in the country which went bankrupt last year. The drop in French sales, however, was simply the result of "lower activity". 

Notably tepid

Earlier this week, advisory firm ISG released its latest index of outsourcing activity. It found that in the second quarter of this, total contract value of all outsourcing deals worth €4 million or more was €1.6 billion – down 23% compared to the same period of 2012. 

ISG described the quarter as "notably tepid". 

A recent report from Forrester Research predicted that European spending on IT outsourcing will 4.4% this year "as economic uncertainty paralyses decisions."

"In markets where IT outsourcing has had headway, such as the UK, existing deals are being renegotiated downward in light of poor economic conditions", the report said. 

Pete Swabey

Pete Swabey

Pete was Editor of Information Age and head of technology research for Vitesse Media plc from 2005 to 2013, before moving on to be Senior Editor and then Editorial Director at The Economist Intelligence...

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