Tieto Corporation Stock Exchange Release 1 October 2014 9.00 am EET
Tieto’s business volumes in Product Development Services will decline due to insourcing decision taken by one key customer. Tieto will adapt its development resources and sites accordingly. Product Development Services will start personnel negotiations in the impacted countries in Europe and Asia.
In Finland, a maximum of 350 persons may be affected while Tieto expects the number of actual reductions to remain below 300. Additionally, PDS seeks to reduce a maximum of 600 positions in Central European and Asian locations. Redundancies are expected to materialize mostly during the next six months. In each country, Tieto will adhere to the local legislation and practices in the process. In Finland, the company will start the process by making a proposal to employee representatives on 1 October 2014.
“The Product Development Services unit and our customers operate in a market where competition is very intense and the demand throughout the value chain is highly volatile. In the telecom market, significant changes are commonplace, as witnessed by the many transformations that have happened in our client and competitor base over the past years. Although today’s news is a big disappointment to us, we will continue to implement our strategy of being a trusted product development partner providing high-quality services to a growing number of global technology companies. With competences in cloud, next generation radio, connected devices and many other technology areas, we continue to be the leading product development partner in the Nordic countries and one of the top players globally,” says Antti Vasara, Executive Vice President, Product Development Services.
PDS represented 16% of Tieto’s sales during the first half of 2014 and this customer accounts for a few percentage points of the Group’s sales. As earlier communicated, PDS sales for 2014 will decline compared to 2013.
Related to the measures now announced, Tieto will book a goodwill impairment charge of around EUR 40 million in its third-quarter operating profit. Additionally, restructuring costs related to these reductions may rise up to EUR 20 million which will be booked mainly in the fourth quarter pending employee negotiations. Including the earlier anticipated restructuring costs, full-year restructuring costs are estimated to be in the range of EUR 45–50 million in total for the company.
Net cash flow impact of the measures during 2014 and 2015 will be minor, as the release of working capital will offset the negative impact of restructuring costs and reduced business volumes. Impairment charges will have no cash flow effect.
Tieto’s guidance for the full year remains unchanged for operating profit excluding one-off items (restructuring costs, capital gains and impairment charges). In its first and second-quarter results, Tieto reported organic growth of close to 3% in IT services and continued profitability improvement.
For further information, please contact:
Antti Vasara, Executive Vice President, Tieto Product Development Services, Tel. +358 2072 010, antti.vasara (at) tieto.com
Media:
Päivi Huuhtanen, Head of External Communications, tel. +358 40 753 7374, paivi.huuhtanen(at)tieto.com
Investors:
Lasse Heinonen, CFO, tel. +358 2072 66329, +358 50 393 4950, lasse.heinonen (at) tieto.com
TIETO CORPORATION
DISTRIBUTION
NASDAQ OMX Helsinki
NASDAQ OMX Stockholm
Principal Media
Tieto is the largest Nordic IT services company providing full life-cycle services for both the private and public sectors and product development services in the field of communications and embedded technologies. The company has global presence through its product development business and global delivery centres. Tieto is committed to developing enterprises and society through IT by realizing new opportunities in customers’ business transformation. At Tieto, we believe in professional development and results.
Founded 1968, headquartered in Helsinki, Finland and with approximately 14 000 experts, the company operates in over 20 countries with net sales of approximately EUR 1.6 billion. Tieto’s shares are listed on NASDAQ OMX in Helsinki and Stockholm. Please visit www.tieto.com for more information.