Cap Gemini Cuts Forecasts Again For Sales, Profit
PARIS -- Cap Gemini Ernst & Young warned that sales and profitability would fall short of earlier guidance because of delays in signing contracts, triggering a sharp selloff in shares of Europe's largest technology-services company.</br></br>Shares in the French company fell more than 13% in Paris trading to 35.83 euros ($44.11). The stock price had more than doubled since last winter, amid tentative signs of an improvement in technology spending and Cap Gemini's own prospects. In a high-profile win over U.S. rival Electronic Data Systems Corp., Cap Gemini last week took home a 10- year outsourcing contract from Britain's tax authority valued at over GBP 3 billion ($5.2 billion).</br></br>But yesterday's profit warning, the company's second this fall, prompted analysts to question its financial reporting and ability to capitalize on any upturn in business technology spending.</br></br>Chief Executive Paul Hermelin had earlier blamed inadequate reporting systems for a series of revenue warnings following Cap Gemini's 2000 acquisition of Ernst & Young LLP's consulting activities, and vowed that those days were over. Questions are resurfacing.</br></br>Pauline Cieutat, an analyst with CIC Securities, said the company's latest warning shows "the fragility of the group's financial communications and of its reporting system."