160 Irish jobs could go in rationalisation at Logica

Up to 160 jobs could go at Logica's Irish operations after the company announced it was cutting 700 jobs in response to difficult trading conditions.

The British-based computer services group warned that revenues would be flat this year while earnings would be significantly down on last year.

"Since the end of Logica's first half, the global information technology market has tightened further, notably in continental Europe and in the telecommunications and financial services sectors," the company said.

Information technology budgets remain under sustained pressure and it does not anticipate any short-term improvement.

Logica's finance director, Mr Seamus Keating, said the company had not yet finalised the precise impact of the planned job cuts - 400 of them in its mobile networks division - on its Irish operation.

Staff in the Republic make up 40 per cent of the number employed in the mobile network division but Logica does not expect as many job cuts as that would imply.

"In Ireland we have a lot of research and development capability and we are planning to maintain R&D spending because it is the future of the business," Mr Keating said.

He said less than a third of the 500 people employed in the Republic would lose their jobs, with the precise number becoming clear over the next four to six weeks. This is the second round of job cuts at the company, which shed 90 jobs in the Republic late last year.

Logica also has more real estate in Dublin than it needs and plans to consolidate its office portfolio in a bid to cut costs.

Instead of two main offices and one small office in Dublin, it plans to run just one office from its location in the International Financial Services Centre (IFSC) as well as its office in Cork.

Logica entered the Irish market nearly five years ago with the acquisition of Aldiscon, a market leader in short messaging systems, email, internet and fax data for transmission from one mobile phone to another.

The British-based group paid nearly £57 million (€72 million) for Aldiscon, making its founder and chief shareholder multimillionaires.

But after a period in which it was a star performer for its new parent, the economic climate for the mobile networks division has deteriorated sharply. Revenue in the second half will be substantially below the £161.7 million seen in the first half while the division is expected to just break even at the operating profit level.

"The rest of the calendar year will remain difficult. There is no sign of an upturn in the market," Mr Keating said. "We are right-sizing the business to cope with a very different environment."

Yesterday's profit warning, the third in five months, knocked 20 per cent off Logica's already-battered shares, taking them to a four-and-a-half year low.

The stock, one of the worst performers on the FTSE Software and Computer Services index this year, is on track for relegation from the FTSE 100 in the next index review.