(Adds shares, analyst)
HELSINKI, July 18 Finnish IT services provider
Tieto on Friday reported an unexpected fall in second
quarter earnings due to weakness at its product development
service business, sending the company's shares down as much as
Tieto's second-quarter operating profit, excluding one-off
items, was 30 million euros ($40.6 million), less than analysts'
average expectation of 34 million and short of 30.6 million
euros posted a year earlier.
"We continue to take actions in our product development
services business where volumes are negatively impacted by
customer insourcing and the market environment is changing,"
Tieto said referring to customers doing IT in-house rather than
buying in services.
Tieto's shares fell as much as 6.3 percent to 19.85 euros by
0715 GMT, compared with a flat Helsinki stock exchange general
"There is no single explanation for the shortfall in
results, but all business sectors disappointed slightly," market
analysis firm Inderes analyst Mikael Rautanen said in a note to
investors. Inderes has an "accumulate" rating on the stock.
The company, market leader in IT services in Finland, has
been cutting costs over the past year to cope with weak demand,
particularly from the telecommunications sector. Europe's weak
economy and competition in telecoms has discouraged companies
from investing in large IT projects.
Tieto's second-quarter sales fell to 386 million euros from
417 million in the same period a year earlier, and were just
below the Reuters poll forecast average of 389 million euros.
Group sales last year totalled 1.6 billion euros.
Tieto kept its guidance for the full year unchanged, saying
it still expected full-year adjusted operating profit to
increase from the previous year's level. Core profit (EBIT) was
141 million euros in 2013.
But the second-quarter profit fall has created some doubts
about this. "We still expect it to reach the guidance, but there
is a very limited margin for error," Inderes's Rautanen said.
($1 = 0.7394 Euros)
(Reporting By Jussi Rosendahl; Editing by Sakari Suoninen and