Capgemini Q1-2009 Results Stable, Investors Push Shares Up 3 Percent

Capgemini released its Q1-2009 results with revenues of €2,205 million, up 0.9% compared to Q1-2009 of €2,205 million but down 0.3% at constant exchange rates.

Outsourcing Services increased 1.1% and Technology Services edged up 0.4%;
Sogeti declined 0.7% while newly-formed Consulting Services dropped 9.8%.

By geography, United Kingdom & Ireland rose strongly at 7.0%, France and Benelux revenues dropped 0.8% and 0.6%, respectively. North America sales had the worst results, falling 6.9% than Q1-2008.

Q1-2009 bookings were €2,221 million versus €2,172 million in Q1-2008, but results across service lines were mixed: Outsourcing Services grew a dramatic 40%, while Consulting, Technology and Local Professional Services bookings dropped 9%

Capgemini said, “These results are in line with expectations and bolster the Group's confidence in its guidance for the first half of 2009 that like-for-like revenues would see a modest decline of around 2% and that operating margin should remain above 6.5% (first-half 2008 operating margin was 7.6%).”

Our take:

Q1-2009 holds up for Capgemini, revenues are actually up modestly and operating margin should drop by about 1%, but some of all this was expected

North America drop shows the dramatic decline for consulting services demand in the US, but Europe seems to be doing fairly well

Outsourcing booking increase demonstrates that clients continue to cut costs and look for cheaper alternatives. Drop in consulting bookings shows hesitancy to engage in large scale consulting or IT engagements.

Capgemini seems comfortable with their original guidance, no surprises here, at least at this moment. From WSJ, “The guidance is positive given the current climate," said one analyst from WestLB Jonathan Crozier.

This echoes somewhat what we saw from Q2-2009 results from Accenture, but with a slightly more positive outcome. Different from Accenture, where investors pounded the stock down 9% on earnings announcements, Capgemini’s stock was up 3.2% in early trading as investors liked what they saw and expressed their enthusiasm by buying up the stock.