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April 21, 2005 12:46 pm

Capgemini sells US healthcare unit to Accenture

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Capgemini, the French information technology group, on Thursday agreed to sell its North American healthcare business to rival Accenture as part of efforts to stem losses in the region.

The $175m deal comes less than two months after Pierre Danon, a former senior executive at UK telecoms operator BT, was appointed to head the struggling North American division.

Capgemini said it would transfer about 600 staff to Accenture, but would keep its outsourcing contracts with healthcare clients and its federal public-sector health consulting activities in the US.

Analysts gave a cautious welcome to the sale, which they said bolstered confidence that the group could hit its 3 per cent operating margin target this year.

?[While] healthcare was considered to be one of Capgemini's top practices in North America . . . they had encountered problems in the last two years with top consultants of the division leaving the company,? said Merrill Lynch in a note.

Difficulties at Capgemini's US division, built around its acquisition of the Ernst & Young consulting business in 2000, dragged the French group to a surprise loss in the first half of last year.

Mr Danon said further details of his recovery plan for the division would be presented on May 4 as part of Capgemini's first-quarter sales announcement.

Investor anger at last year's first-half loss has added to pressure on Paul Hermelin, chief executive, and triggered rumours of a possible takeover by Hewlett-Packard, the US computer and printer maker.

There has also been speculation that the French group, which this year had its credit rating cut to junk status by Standard & Poor's, could be forced to sell its entire consultancy business in the US.

Capgemini denied it planned to sell more of its North American activities.

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