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Untangling Sogeti may inspire other French companies

For Serge Kampf, Jan. 12 marked the end of his reign as autocratic ruler of French computer services and consulting company Sogeti. At a press conference in Paris, Sogeti shareholder Daimler Benz agreed to help recapitalize the heavily indebted company. In return, Chairman Kampf ceded majority control and agreed to eliminate a maze of cross-holdings. The new structure finally allows Daimler, which bought 34% of Sogeti in 1991, to influence management. "The deal stacks the cards in favor of Daimler," says a senior executive at a rival company.

The management makeover at Sogeti is a wake-up call for two key subsidiaries, Cap Gemini Sogeti and Gemini Consulting, which have suffered heavy losses. It's also a warning for other French managers who shield themselves from shareholders through cascading holding companies. The pressure to increase accountability is rising in France, and companies that lack transparent structures will have trouble making global ties and raising foreign capital without making the kinds of changes Daimler forced on Sogeti.

If Sogeti's overhaul helps accelerate turnarounds at Cap Gemini and Gemini Consulting, it may encourage other French companies to transform themselves. Telecom giant Alcatel Alsthom, which went from one of France's most profitable companies in 1994 to the biggest money loser in 1995 with more than $5 billion in losses, also has installed a more rigorous model of management accountability and corporate transparency. "More and more French companies will be organized that way," predicts Michel Berty, the French president of Cap Gemini Sogeti's U.S. unit.

CONSENSUS. Both Cap Gemini and Gemini Consulting need to get in fighting shape fast if they are to defend their combined No.2 ranking for their industry in Europe. In 1994, their European market share fell from 9% to 8.2%, according to market researcher Dataquest Inc., while U.S. rivals Electronic Data Systems Corp. and Andersen Consulting gained share.

One problem is that U.S.-based Gemini Consulting and Paris-based Cap Gemini have radically different corporate cultures. But they need to cooperate and bid for contracts together to boost market share. A slew of businesses acquired under Kampf's reign exacerbates the cultural hodgepodge. "To the customer, it looks like a loose basket of companies instead of a tight-knit multinational operation," says Roger Fulton, a senior analyst at Dataquest.

But with the new setup, things will change. "All the owners will agree on a clear strategy," says Daimler board member Klaus Mangold, CEO of Daimler's computer services subsidiary, Debis. Working with Kampf, Mangold vows to boost the group's annual sales by 45%, to $4 billion, by 1999. And if profits don't turn around, at least it will be easier for Daimler to cut its losses and pull out.

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