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Sema tanks on warning
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November 24, 2000: 6:32 a.m. ET
UK tech consultant sees shares collapse after warning profit will fall short
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LONDON (CNNfn) - Sema Group PLC shares almost halved Friday after the British computer services firm warned profit this year would undershoot expectations after a $4.7 billion acquisition turned sour.
The shares fell 43.6 percent to 350 pence in morning trade in London, slashing the company's market value by £1.7 billion ($2.5 billion) to £2.1 billion – far below the sum it paid in March to buy Atlanta, Ga.-based LHS Group.
The company cautioned that earnings in the six months to the end of December would "clearly be below those anticipated by the market and Sema Group management."
 The purchase of LHS has blown up in Sema's face embarrassingly quickly. The U.S. company, which provides software that helps telephone operators calculate customer bills, suffered a "significant deterioration" in its performance during the third quarter, Sema (SEM) said in a statement Friday.
The warning sent a shock wave through shares of software and computer service providers in London, causing double-digit losses for competitors such as Misys Group PLC (MSY) and Logica PLC (LOG). But France Telecom, which owns 22 percent of Sema, rose 1 percent in Paris.
At the time of the LHS acquisition, Sema had a market value of £8.9 billion. Analysts have said the British company overpaid for LHS and had no track record of acquisitions.
Experts said Friday that the information technology sector had suffered weaker-than-expected demand in 2000 as corporate customers had failed to crank up spending as much as the industry had hoped after the millennium-bug scare.
Investment bank Credit Suisse First Boston slashed its 12-month share price target for Sema to 1000p from 1650p but maintained its "buy" rating.
"We continue to think the strategic improvements in both telecoms and the rest of the business will benefit Sema long term," CSFB said in a report.
"While we knew we were early with our call and that the road might be bumpy, the bumps have proven large indeed, and we have clearly been wrong here. We do think that this should mark the bottom though, so we think it's too late to sell," CSFB said.
CSFB lowered its estimates for the second half of 2000 and first half of 2001. It is now expecting Sema to book £1.85 billion in revenue in the first half of 2001, down from a previous estimate of £2,092 million.
--from staff and wire reports 
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Sema Group
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