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Capgemini Eyes Energy, Growth Markets to Ride Urbanization

Source: Bloomberg

Capgemini SA (CAP) will weigh acquisitions in countries such as Mexico, Turkey, and Russia as it aims to gain from urbanization in the world’s fastest-growing economies.

Those countries may follow current priority China in efforts by Europe’s largest computer-services company to expand in emerging markets, Deputy General Manager Paul Spence said in an interview. Paris-based Capgemini is also expanding in fields such as energy and water management that will be important to fast-urbanizing regions, he said.

“Mexico is very interesting for us, everybody thinks that Turkey will be an important role for us going forward and we don’t have any presence at all, and our energy- and consumer- product clients absolutely want us in Russia,” Spence said. “If we could do one major geography and make it material per year, I’d be quite happy with that.”

Information technology suppliers are looking to new markets and technologies as competition intensifies in North America and Europe, partly from Indian companies such as Wipro Ltd. (WPRO) International Business Machines Corp. (IBM), the world’s largest computer-services provider, is planning to open 10 new offices in Africa by 2015 to exploit growth in the banking and telecommunications sectors, the company said this month.

Brazilian Deal

For IT companies, “organic growth in Europe is looking extremely unexciting,” said Jonathan Crozier, an analyst at WestLB in London. Still, deals in countries such as Russia — where Finland’s Tieto Oyj (TIE1V) recently canceled a joint venture with a local IT provider — carry significant risk, he said.

Capgemini spent 233 million euros ($332 million) last year for a majority stake in CPM Braxis, a Brazilian information- technology provider, making it the market leader in the Latin American country. Future acquisitions will be concentrated among companies with between 50 million euros and 350 million euros in annual revenue, Spence said.

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Capgemini rose 57 cents, or 1.5 percent, to 39.89 euros at the 5:30 p.m. close of trading in Paris today. The shares have jumped 15 percent this year, giving the company a market value of 6.2 billion euros.

Most of Capgemini’s sales are in the developed world. France, the U.K., Ireland, and the Benelux countries accounted for about 60 percent of 2010 revenue, or 5.16 billion euros, compared with 21 percent, or 1.88 billion euros, from Asia Pacific, Latin America, and the rest of Europe. The company made 10 acquisitions last year, of which CPM Braxis was the largest.

‘Smart Grid’

Energy- and water-management services are attracting technology companies as utilities and governments look for ways to increase efficiency. Atos Origin SA (ATO), the French provider merging with Siemens AG (SIE)’s computer-services unit, last year set up a separate subsidiary, Atos WorldGrid, to specialize in “smart grid” energy networks that monitor and adjust electric output. Utilities may spend as much as $46 billion on smart grids by 2015, according to ABI Research.

The logic of expanding energy and water services businesses “applies into the transportation area, because as the migration occurs from rural to urban there’s a tremendous opportunity” in emerging markets, Spence said.

 

About Kirk Laughlin

Kirk Laughlin is an award-winning editor and subject expert in information technology and offshore BPO/ contact center strategies.
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