Logica and CMG, two European technology services companies that recently announced a merger, will cut 310 highly skilled jobs in Dublin and Cork.
The newly merged firm LogicaCMG, which undertakes cutting-edge research in mobile phone technologies, said yesterday it would close a software unit in Cork and shed significant numbers of jobs at its Dublin offices.
LogicaCMG will now employ just 100 staff in the Republic following this latest rationalisation, significantly below the 850 people that the two firms employed in Dublin and Cork at the height of the technology bubble in 2000.
It is understood the firm has also decided to cease developing software in the Republic but will maintain its finance function here to avail of low corporate tax rates.
The job losses are a blow for IDA Ireland, which considered Logica and CMG very important clients because of the high-end research and development work they conducted in the Republic.
An IDA spokesman said he was surprised and very disappointed by the job losses, which had been communicated to the agency via staff rather than management yesterday.
"We certainly expected the firm to maintain some software development work here because of the strong reputation of Irish software. . . but it emphasises how bad the telecoms sector is now."
The IDA paid the two firms more than €5 million in employment grants in recent years. LogicaCMG has been told by the agency to repay at least €3.5 million.
Logica and CMG based major development operations in the Republic to avail of the low corporate tax rate and employed hundreds of skilled staff in research, finance and management posts.
Logica's most recent accounts show the firm paid out more than €38 million in wages and salaries to Irish staff in the year to June 30th, 2001. During the same period, Logica Ireland reported pre-tax profits of €98 million on revenues of €367 million. It also paid €11 million tax to the Exchequer.
A spokesman for LogicaCMG said the redundancies were the result of an internal review conducted by the firm following Logica's merger with Anglo-Dutch group CMG in November 2002.
This internal review had been carried out by management to eliminate duplication and overlapping positions from the merged company, he said.
The steep decline in demand for IT services and mobile phones over the past two years has played a key role in Logica's decision to downsize its Irish operations. Analysts have also highlighted the firm's weak performance in developing systems for multimedia mobile messaging compared to its dominance of text messaging.
Lower corporate spending by Logica's key corporate clients saw the firm's shares collapse from £27 sterling (€40.64) in March 2000 to £1.11 last year. This prompted the firm to seek a tie-up with rival CMG in November 2002.
The merger of Logica and CMG, which together employ 23,000 staff, is forecast to cost about 1,400 jobs this year across 34 countries. The 310 redundancies in the Republic are the first to be announced by the new group.
LogicaCMG said the consolidation of the firms would save £60 million sterling in operating costs per year by removing duplication of personnel and overhead costs.
Logica entered the Irish market in 1997 when it acquired the Irish software firm Aldiscon for €72 million, in the process making several of its founders millionaires.
CMG set up offices at the University Technology Centre in Cork in 2000 where it developed messaging and gateway software for the telecoms industry.
The job losses at LogicaCMG follow rationalisation at several other IT services firms, including Cap Gemini and Ericsson. The ongoing weakness in this sector will make it more challenging for redundant staff to find new jobs.
The Tánaiste, Ms Harney, described the job losses as disappointing and surprising. "I understand that the company is announcing lay-offs across its operations worldwide and, while that is of little consolation, it does underline the fact that job losses in the industry are not a phenomenon that is unique to Ireland," she said.
