Capgemini dived to an unforeseen first-half operating loss today as lower revenues, the cost of new outsourcing contracts and US and British weakness kicked in.
The company reported an operating loss of €20 million from a profit of €81 million in the first six months of 2003, sending its shares tumbling more than 13 per cent.
Compounding Capgemini's woes, rating agency Standard & Poor's cut its long-term credit rating to BBB- from BBB, putting the firm on the lowest rung before junk status and said it was considering further downgrades.
By 11 a.m. the stock had dropped 12 per cent to €19.73 against a 2.3 per cent drop in the DJ Stoxx European technology index.
Credit Suisse First Boston (CFSB) downgraded Capgemini stock to "Underperform" from "Neutral", while the cost of insuring Capgemini debt against default leapt as much as 15 basis points in early trade.
"We believe that the combination of poor operating results in the first half combined with an uncertain outlook and the resignation of a well-regarded CFO is likely to have an adverse impact on the stock," CSFB said.