French technology consulting and outsourcing giant Cap Gemini refuted a report that it is mulling the sale of its North American business.

"As our group chief executive officer Paul Hermelin told Bloomberg this morning, 'Capgemini denies that it plans to sell its North American activities. We are concentrating on improving operating performance in North America,'" a Cap Gemini spokesman told WebCPA on Friday.

Cap Gemini bought the consulting arm of Big Four firm Ernst & Young for a whopping $11.1 billion in stock and cash in February 2000, in what was to be the first of four consulting spinoffs among what was then the Big Five.

On Friday, The New York Times had reported executives close to the company as saying that it was considering selling the North American unit -- which is said to employ about 10,000 people and to account for about a third of the company's $7 billion in revenue -- because of problems at the operation and because of persistent losses at Cap Gemini, which reported a $24.6 million operating loss for the first half of the year. According to the Times, a sale now might not be able to reap $1 billion.

E&Y was the first of the major accounting firms to divest its consulting practice, when firms came under major pressure by regulators to cut their consulting ties because of the battle brewing over auditor independence issues. The eventual implosion of Enron and the subsequent decline of the once-mighty Andersen accelerated the splits. Free from their accounting firm ties, the consulting units aren't subject to the SEC auditor independence rules that limit the services they can provide to firms audited by their accounting brethren.

Arthur Andersen's former consulting arm divorced its CPA firm counterpart in August of 2000 and went public as Accenture in July of 2001. KPMG Consulting went public in 2001 and later changed its name to BearingPoint. PricewaterhouseCoopers dropped plans for an IPO and sold its consulting unit to IBM in 2002 for roughly $3.5 billion in cash and stock. Deloitte jettisoned plans to spin off its consulting practice via a buy-out by the consulting group's partners in early 2003, making it the only remaining Big Four firm with consulting ties.

Executives reportedly told the Times that Cap Gemini has begun canvassing for potential buyers and is expected to hire investment bank Lazard to run the auction if the board decides to proceed with a sale. According to the Times, potential buyers are expected to be traditional technology hardware companies looking to expand into consulting and outsourcing. The paper named Hewlett-Packard as a front-runner, along with Electronic Data Systems, EMC, Computer Sciences, Atos Origin and Tata Consultancy Services.

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