Cap Gemini E&Y to Slash 5,500 Jobs

Paris-based Cap Gemini Ernst & Young, part of which was formerly the consulting arm of Big Four firm Ernst & Young, has announced an extensive restructuring plan that includes an immediate cut of 2,500 jobs, primarily in the telecom and financial services areas.

Over the next six months another 3,000, largely in back-office positions, will be cut as well. In addition, the company will separate its consulting, technology, and outsourcing functions into separate businesses. "This is a transformation plan designed to meet the new fundamentals of the market," said CGE&Y spokesman Philippe Guichardaz. "We're trying to adapt the business model to the conditions of the market."

CGE&Y's plan also calls for the closing of buildings and data centers, and the company expects to experience savings of about $227 million per year as a result of the changes.

The latest announcement of layoffs comes on the heels of a similar announcement last year where the firm reduced staff globally by 5,400. The company indicated that about half of the current group of laid off employees will be offered positions elsewhere within the company.

Analysts who have been lukewarm toward the publicly-held company recently are holding off on any change in their recommendations. "Today's announcement gave us limited additional confidence," said Merrill Lynch's Ariel Bauer. "We are retaining our intermediate term Reduce/Sell recommendation."

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