Redundancies at Misys as bank IT spending cuts bite

Redundancies at Misys as bank IT spending cuts bite

Misys has cut 350 jobs from its banking and securities division in response to a continued slowdown in bank IT spending.

The UK-based banking systems supplier will take a £6 million charge against the cutbacks in the second half, which are principally directed at its professional services business. Misys says the cost of the action will be more than offset by savings. The group intends to hire more professional services staff from local markets at cheaper rates, including 100 new hires in Bangalore, India.

Confirmation of the job losses, first reported by Finextra last year, comes as Misys reports first half figures for the six months ending 31 November 2002. Group profits for the half year before goodwill and tax stand at £56 million, up 16% from the year-ago period, with the healthcare and financial services divisions both performing above par.

Within banking and securities, Misys' largest division, revenues were down eight per cent but operating profits, at £27 million, were broadly in line with last year due to improved margins.

The good news on margins masked a sharp slowdown in sales. Initial license fee (ILF) order intake was 20% lower than the previous year, while ILF taken to revenue at £38m was lower by six per cent. The ILF order book at £25m was lower than at the end of May 2002 but ahead of November 2001.

The lower level of ILF revenues over the last twelve months also slowed the growth in maintenance revenues which at £61m were just two per cent ahead of last year. More significantly, professional services revenues at £37m were 21% below the previous year, partly due to the lower levels of ILF and partly because professional services have been disproportionately affected by cutbacks in banks' IT budgets says the vendor.

The firm says that while there is no evidence yet of a recovery in market conditions, "we believe that IT budgets in banks for third party software, are unlikely to fall further".

However, research conducted by Finextra for release at the Finexpo City Technology Strategies conference next week, ( ) contradicts this assumption with evidence for a further moderation in IT spending at investment banks over the coming year.

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