The ratings on France-based Cap Gemini S.A.--the largest European consulting and IT services provider--reflect the company's strong business positions worldwide and significant financial flexibility, partly offset by a sharp deterioration in profitability measures. Significantly reduced corporate IT spending worldwide pressured revenues and margins in 2001. Cap Gemini's operating margin fell to 5%, versus 10.5% in 2000. The important exposure to the North American market--which experienced the sharpest decline worldwide in 2001--increased operating pressures amid reorganization difficulties and high staff turnover. The integration of Ernst&Young's consulting activities is likely to continue to require management's keen focus under still-difficult market conditions. The group's IT services business was most affected by the 2001 market downturn. First-quarter 2002 revenues are expected to
