Two consulting firms lay off staff in wake of IT spending slowdown

Blaming the slowdown in IT spending, accounting and consulting firm PricewaterhouseCoopers said it's cutting 750 to 1,000 jobs from its U.S. consulting unit, while Internet consulting firm Scient Corp. said it's cutting 675 jobs, or 52% of its workforce.

Scient also warned of wider-than-expected losses for its fourth quarter and said it may cut an additional 175 positions over the next several months, depending on business conditions.

In December, Scient slashed 460 jobs (see story), while PricewaterhouseCoopers cut 400 jobs from its U.S. consulting unit in January (see story).

PricewaterhouseCoopers spokeswoman Sehra Eusufzai said the latest job cuts represent about 8% of the U.S. consulting unit's 12,000 employees. She said PricewaterhouseCoopers' global consulting staff employs 38,000 people and the New York-based company has 160,000 employees worldwide.

Eusufzai attributed the cuts to the slowdown in technology spending by multinational companies in the U.S.

Scient, too, is feeling the pinch of a slowing economy and the weakening of IT spending.

"The economic environment remains extremely challenging," Bob Howe, chairman and CEO of Scient, said in a statement.

"Our large enterprise clients continue to delay IT spending initiatives, which has resulted in further deterioration in our pipeline," he said. "At this juncture, we believe the weakness in IT spending trends may extend well beyond the next quarter or two, further limiting our visibility, and we may experience negative revenue growth in the next several quarters if such trends continue. As a result, we have made a very difficult, yet necessary, decision to take workforce reductions and downsize our geographic footprint to further align our cost structure with market demand."

Scient said it expects to report a pro forma operating loss of approximately 39 cents per share and revenue of $27 million for the quarter ending March 31. Analysts surveyed by Boston-based First Call/Thomson Financial had forecast losses of between 5 and 24 cents.

Scient also said it will take a total restructuring charge of between $95 million and $110 million that involves taking $60 million to $65 million in the March quarter and $35 million to $45 million in the June quarter. The company said it expects to have $160 million in cash at the end of the March quarter.

As part of the restructuring, Scient is also closing its offices in Los Angeles and New Jersey; reducing its operations in San Francisco, Chicago and Boston; and moving its corporate offices from San Francisco to New York. The company said these moves should save approximately $175 million a year.

"Postrestructuring, we believe our cash balance will approximate $100 million at the end of June," said Bill Kurtz, executive vice president and chief financial officer. "We believe that the restructuring actions we are taking should significantly reduce our fixed costs and accelerate our return to profitability." Kurtz also announced he would resign, saying he didn't want to relocate to New York.

George Price, an analyst at Legg Mason Wood Walker Inc. in Baltimore, said Scient's business is evaporating because of the slowdown in IT spending due to the weakening economy.

"The trends are going against them," he said. "Scient was one of the biggest and fastest-growing companies, and it is getting hit particularly hard. [Their] clients are more concerned about their own businesses and are restricting their IT spending, focusing more on things like supply-chain management, where they see the benefits and get more of a [return on investment].

PricewaterhouseCoopers and Scient aren't the only IT consulting and systems integration firms that have fallen victim to the slowing economy.

In March, Boston-based Viant Corp. said that it would slash 38% of its workforce, or 211 employees, and close its offices in Houston, San Francisco and Munich, Germany, to reduce costs (see story). And El Segundo, Calif.-based Computer Sciences Corp. said it would cut as many as 900 jobs because of an earnings shortfall. In addition, Xpedior Inc., a Chicago-based e-business consulting firm, announced that a decline in revenue had forced it to lay off 300 employees, or 42% of its workforce. Xpedior also closed four offices.

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