C&W shuts e-business advice arm

Cable & Wireless is closing its 300-strong e-business consulting division due to a slowdown in the telecoms sector. Staff were told in a memo on Thursday but the company has promised to find new jobs for the consultants.

"The market has changed dramatically in four to six months," a spokesman said. "The poorer conditions mean maintaining the division as an individual group is no longer appropriate. It is not the most efficient return on capital."

The division, based in the UK and called Digital Services, offered consultancy services to C&W's clients and customers. C&W will ditch the name and move the staff into a new unit called C&W Global Ventures. The £240m acquisition of San Francisco-based web-hosting company Digital Island helped reduce need for Digital Services. In March, C&W said it would cut 4,000 jobs in the UK and the US, almost a quarter of its workforce. The company spokesman insisted no further job losses were planned.

City analysts say the IT and telecoms consulting sector will be hard hit by the slowing of the economy. Consultancy services are often one of the first expenditures companies cut back when times are tough. The hi-tech sector in particular is suffering from a hangover from last year's over-inflated technology boom.

Cable & Wireless is an anomaly amongst its peers in the telecoms sector because it is cash-rich, with £6bn on its balance sheet, after the sale of its Australian arm Optus. The company has been under pressure to return money to shareholders via dividend payments.

C&W issued a profits warning in March saying returns would be 20 per cent lower than analysts' expectations. Despite this, C&W's chief executive Graham Wallace and 100 executives got a generous share options scheme last month that could net Mr Wallace £4.5m in pay and options.