CGI not even considering layoffs, bucking tech-sector trend of widespread job cuts

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One after another, North America’s biggest technology companies have announced thousands of job cuts. Canadian tech-services firm CGI Inc. says it’s not even considering following their lead. 

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CGI saw its payroll rise 10 per cent last year, to 90,250 people worldwide. But layoffs aren’t on the agenda as the company, which provides outsourced IT services and consulting, tries to win contracts from organizations that are reducing staff, chief executive officer George Schindler said in an interview.

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“We are seeing opportunities right now to help clients in cost savings” as the economy slows, Schindler said.

Montreal-based CGI this week reported a 12 per cent increase in revenue for the three-month period that ended Dec. 31 and beat analyst expectations with adjusted earnings of $1.66 per share. Bookings — a measure of new contract wins, extensions and renewals — rose 12 per cent to $4 billion in the quarter.

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“While macro headwinds continue to have the potential to moderate investment, we believe CGI’s market position and cost savings/efficiency service offerings combined with its operating prowess offers resilience with growth,” National Bank of Canada analyst Richard Tse said in a report to investors. 

Larger deals

About a third of CGI’s business is with governments, which “tend to be a bit countercyclical,” Schindler added.

Schindler said he’s growing more interested in larger-sized acquisitions. “We’re looking at hundreds of millions rather than $50 million to $100 million,” he said. “Then, there’s transformational deals. Those are the deal that are multibillions. Yes, we are having those discussions, but those can go on for a very long time.”

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CGI has $2.8 billion in cash on hand and credit facility, with access to more, according to a company statement. It has a market capitalization of $28 billion.

“It seems like the company’s strategy has been more of smaller tuck-ins to add capabilities,” Edward Jones analyst David Heger said by phone. “It sounds like there at least might be something bigger than they’re looking at.”

The company, which counts Accenture PLC among global rivals, has also increased its marketing budget and is spending on events and partnerships to become better-known. “I think that we sometimes are the best-kept secret and we want to be the best, but we don’t need to (be) as much of a secret,” Schindler said.

Bloomberg.com