Delphi shares slump as IT ambitions are scaled back

SHAREHOLDERS IN the computer staffing group Delphi suffered another setback yesterday as the group abandoned ambitious plans to become a fully- fledged information technology services company.

Delphi shares lost 21 per cent of their value, slumping to a three-year low of 306p on the news. The shares peaked at 827p in March this year.

Tony Reeves, the chairman of Delphi, said the group had decided to seek a strategic partner for its US subsidiary, Alpine, which suffered a loss of pounds 1.4m in the first six months of the year.

Mr Reeves said Delphi had underestimated how much investment the subsidiary, which manages clients' computer systems from a remote location, required.

"It hasn't worked because the technology has taken us into a new service which has taken much longer and much more money than expected to develop," Mr Reeves said.

The group is also planning to sell its 30.8 per cent stake in Decan, the French IT solutions business.

Mr Reeves said Delphi had received three offers for Alpine, and hopes to complete a sale by the end of the year. But he said it was too early to tell whether the company would suffer a loss on the sale. Delphi bought Alpine for $25m (pounds 15m) in 1996.

Ingrid von Hentschel, IT analyst at Beeson Gregory, said: "In order to become a solutions company, Delphi would have had to put too much money in. They didn't have the money and they didn't have the management." However, she backed Delphi's decision to pull out. "It's a rational decision at long last."

Mr Reeves said Delphi's priority now was to concentrate on its staffing operations.

He added that the group was looking to strengthen the management of its staffing business by recruiting a new chief executive for its American division, which had also suffered from the difficulties at Alpine.