CGI downgraded from "arousing" to "neutered"

The same happens when you buy a new Mercedes, the first few weeks are totally great but then after 6 months you stop enjoying its "newness" and wander around the dealer to spot new models.

Wall Street Analysts were like female teenagers drooling over Justin Bieber (or Elvis Presley) when we purchased Stanley and posted our record Q4, but now the chick-of-the-day is not CGI and they downgraded us as if we're just a bunch of has-been.

To hell with them. Wall Street will upgrade us to "fucking hot" next time we do an acquisition.

Montreal's CGI completes Stanley takeover

We did it. I gotta say it took more time and efforts than initially planned, but now I’m proud to say that CGI has reach the 31,000 employees – I mean members – milestone.

Anyway, we’re dispatching a HR commando to Stanley’s former HQ to start the abduction process. A swat team of accountants is also on the way to seize all financial information that might have been left out during our due diligence process – I instructed our team NOT to have breakfast that morning, so everyone feels a bit edgy.

We learned a lot since we banged AMS back in 2003, our HR/accountant gladiators have been trained accordingly and it is my objective that the Stanley’s integration takes much less time. We need to process acquisitions faster, we can’t reach the profitable growth nirvana if we spend our days filling out paperwork.

I spent so much time with Stanley’s financials that I have become one with their numbers. We are so intimate now I can tell you how much each of their employees are making. Pop up a name, I’ll tell you their salary, how much was spent on training, how much each got last year. Serge thought I was joking and he put me to the test. John Kleine? $58 850 USD, $450 in training, got a 4% raise last year, billed $102 048.30 last financial year, $621.02 paid on expense reports. Denise Caufield? She’s fucking expensive, $95 120 but she’ll get no raise for the next 5 years – but don’t tell her that.

What doe John and Denis look like, asked Serge. I go, I don’t know but this is irrelevant. What matter is that – what’s their name again - will be part of our profitable growth plan, and their small contribution to our bottom line will fuel our next acquisition.

Speaking of which, I am meeting with bank officials this week to goose our credit line. I’m also thinking of issuing bonds yielding 0.05% that our members would be obligated to sell door to door like cult members. At night, not during normal business hour, I don’t want to impact our BU earnings. Look, I work for this great company and we need money to spread the profitable growth gospel, care to buy some great bonds to fuel our next merger?

I told you so. Did I?

Even during my conference call with analysts following our Q2 results I was pestered and annoyed about the same stupid questions. I told those Brioni-clad morons that we'd buy something when the time would be right, and patience is not something you find on Wall Street these days.

As you all know by now, we've done a sizeable acquisition last week. Stanley's a great fit for CGI and the risk is very low for us. 5,000 billable people, they suck money from the U.S. government so it's not like the client will run out of money soon. They know how to get in, and we'll merge them with our Federal business unit. Did we pay too much though?

Stanley brings $865M in revenue for $126M in gross profit. That's $25,200 per drone, which is pretty similar do what we do ($654.76M in gross profit for 26,000 employee gives $25,183 per drone). This means those guys know how to press lemons and work pretty much the same way. Stanley could not care less about dividends so we're also on the same page. Dividends are for sissies.

On the downside, our profit and operating margins are a bit different and their corporate culture has some defects. Stanley was nominated a few times as "Best Places to Work" in some states, this highly suspicious event will require immediate attention from our senior management – meaning me. Happiness has a cost and it goes against the spirit of profitable growth. Call me a party pooper if you want, but unlike Happy Raymond I do not believe it is our mission to make members happy. Having said that, once we integrate their staff into our internal processes we should be able to smooth that out.

What does this mean for you members? How does this deal impact your day-to-day routine? Should you raise your expectation level about CGI? I'm happy to report that the Stanley deal won't change a thing. You'll still punch tomorrow and you'll still get a 1% raise this year. If you want to thank me for not shaking your world, the address is still fake mike roach at gmail dot com.

On a final note, the picture above is not my favorite portrait, it looks like a Klingon beamed aboard my ship and I'm very pissed off and about to knock him out with my phaser gun. But this is a favorite tie, aka crossword puzzle.

About our credit line

I'm still in a very negative mood from yesterday's news, but Serge advised me to take it easy and maybe open some kind of center of excellence in Nassau to cater the needs of the filthy rich but not famous. Anyhow, today I'd like to share with you our latest press release.

Everywhere you go, you hear business people claim some time-related wisdom, like "time is of the essence" or "whatever happened to the New York minute". Me, I don't give a shiitake about time because this dimension of the universe is on my side. I am sitting on a money printing machine where I don't invest in R&D and my clients are loaded. My enployees have been neutered and comply with the highest obedience standards (ISO something, I can't recall). So what's the rush?

I've been pushed by my board to put out a BS press release because they feel it's mandatory to have the company in the newspapers at least twice every quarter. Sure, I said, I don't have anything smart to say but let's brag about our cash reserve and credit lines, that's will wet the pants of every junior financial analyst out there.

Obviously this drivel might be interpreted as a subtle tactic to lure other IT consulting firms to call me and beg to be bought and integrated into the CGI universe. Money quote: If I find the right company with the right criteria, it could double me in the U.S. and triple me in a sector.

What I don't say is that it's been 6 years since we've done a major acquisition and we can't find any company with the "right criteria". They're too freaking expensive, I want to buy a Bentley for the price of a Ford Focus. Some companies are affordable, but its founders would like to have a direct influence if we were to buy them. My message to them is this: dudes, unless you guys are ex-Bell executives and can prove to me your obedience, there's no way you can fit at CGI. The last thing I need is new VPs who want to run the show.

Managing a CGI business unit here is like running a Subway franchise: we tell you what to put on the walls, we tell you what the menu and the price will be, and we tell you when to smile during the process and how to hand out change to the customer. If you're looking for work where "initiative" is rewarded, maybe you should send your resume to the NHL.

The real subtext is that the company is for sale, we'll never say it though, so this is why we're bragging about how big our bank account is. I will always deny it, but it's the truth. Think about it. When you're selling you car, what do you do? You wash the exterior, you clean it, you remove any trace of weed from the ashtray, you*ll even put some gel on tires to make the clunker look like a real gem. It's the same with selling a company, we implement military-type management, we deploy hundreds of standardized processes, we force PeopleSoft down

the throat of all our business units, we keep salaries extra low, everything so that company looks like a real sparking gem. So when the buyer shows up, he expects to pay a premium to get us.

More later, dear members, Q2 is coming up and there's work to do.

Can our stock go even higher?

I overheard a conversation at the sandwich shop where I usually go on week-ends, two guys were discussing the CGI share price. One said really excited and thought that GIB could reach $20 by mid-2010. In the midst of all the bad news going on the market CGI was, quote: a rock solid foundation. I almost hugged him, but I didn't. Swine flu concerns.

His friend was a bit more pessimistic. His argument was that the CGI stock price got inflated following the acquisition of EDS by HP, then Perot by Dell and then ACS by the copier company. If CGI goes through 2010 without any major acquisition - or being acquired - the share could dip below $10. Analysts want excitement, they want to see real growth.

So I left the sandwich shop with mixed feelings about how well is CGI is perceived by outsiders. If only they could see what I see.

What if CGI acquires another company (part 2)

A short post today, I’m visiting our Paris office, the French have such a way with protocol - and I'm not talking IP. They’re not bad though, I’ve been told I would be treated tonight with some exquisite French cuisine and more wine than my liver can absorb. Vive la France!

More thoughts on the Eat vs Being Eaten talk that goes on these days during our annual tour. Our business units leaders are always asking when CGI will be sold, what will happen to them if we’re integrated into a larger monster like IBM or Cisco and what kind of golden parachute they can get if such a thing happen. Everyone knows that this day will eventually come, and all eyes are on me to provide an answer. Be patient, CGI members, Michael is leading you on a journey through the desert, and after 40 days and 40 nights we will arrive to a wonderful oasis. That or we'll spend the next 20 years with a stock price between $9 and $12.

Personally, I’d love to take CGI up to 100,000 employees but I have to say that I sometimes don’t think such goal is reachable. Like I said in my previous post, acquiring a competitor is a lot of work and involves kicking a lot of asses. I know, because I kicked more butts when we acquired AMS than a typical football coach does in a lifetime. I’m telling you, folks, it ain’t easy. My shoes are so worn.

What if CGI acquires another company?

As you all readers probably know, CGI is on a journey to do an acquisition that will strengthen our core business and provide customers with more value-centric strategic business solutions. In simpler terms, it will increase our earnings.

Serge and I were going last night over some potential targets this morning, and locations were always a key issue. Let’s say that there’s this good IT firm in Chicago, Boston or New York with $50M in revenues that does basically the same shit that we do, they’re up for sale because the founders are fed up with managing morons, they want to cash in and retire to the Bahamas so that they can drink margaritas for the next 20 years.

If we buy this firm and CGI already has a location in this town, the burden to integrate their employees with ours is a major challenge. You start by managing egos and who will report to whom, of course 75% of the new staff will be pissed off because 50% won’t get a promotion, another 25% will report to a new person who doesn’t care about their past corporate culture and the remaining 25% is pretty much brain dead.

Then it’s this make-believe part when we pretend that their corporate culture would be a nice addition to the CGI way, when in reality we couldn’t care less and can’t wait to integrate their employees into our billing system. Time is of the essence, so we usually deploy a PeopleSoft SWAT team within 4 hours following the press release about the acquisition so we can merge their billing and HR processes into ours.

This forced marriage is obviously doomed to fail and our goal is to retain 10-15% of the original staff after 3 years and 95% of their customers. If CGI is already the dominant player in the city, then those numbers are usually lower. So it’s a lot of effort on our end to drive this profitable growth, our employees do not realize how much work we’re putting into this when we know in advance the train is heading toward a cliff. But so is the price of buying a competitor.

An option of course if to acquire a company that has offices in places where CGI is not already present. We’re considering places like Turkistan, Uzbekistan and other remote places whose idea of information technology revolves around distributing AK-47 maintenance manuals on Torrent. The downside is, local government regularly tortures people for a bunch of reasons, and if you have employees detained for political motives they become not billable to your customers (unless the customer is the same government body that tortures them, then it’s something we would include in the contract to recoup any potential loss).

Note to self: check the classifieds this week-end under Business for sale.

We're here! We're here!

Those guys at Seeking Alpha deserve a round of applause for boosting CGI's visibility. Read here. Money quote: Dell valued Perot at $30 a share, which represents trailing multiples of 30x price earnings, 1.56x revenue and 13x EBITDA. Using the same multiples for CGI would mean a takeout price between $20-$30 (Canadian - the shares were trading for $12.84 Monday afternoon).

Holy Jumping Catfish! 30 bucks !

Steve Ballmer never called me back, maybe I should e-mail him this link don't you think? That would set a opening price for negotiations. I need to talk to those Cisco guys, which reminds me something. A guy called my office the other day, I thought he was trying to sell me switches and I told him to get lost. His name was Chambers, and now this name rings a bell...

One less competitor?

Says here that I told the press that Dell buying Perot was a good thing because it eliminates a competitor. Serge kindly reminded me after the event that our competitor still exists, Dell will not convert Perot into a laptop manufacturing business. Oops. Maybe I got too carried away. I mean, I hope the Dell/Perot alliance will bear as much fruits as AOL/Time Warner and General Motors/Saab if you know what I mean.

Xerox buys a company three times the size of CGI

I know what you guys are thinking: Mike, what the heck are you doing? Are you sitting on your hands watching a beautiful Canadian sunset wondering what could possibly please a CGI shareholder these days?

Xerox planning to buy ACS for $6.4B is yet another frenzy going on the market these days, it feels like the 90’s when everyone in the office was buying the same overpriced stock because they heard about it in the men’s room. What’s next, you ask, what hardware company will buy an IT integrator? Dewalt? John Deere? I’m hearing your thoughts, CGI is a prime target because it also has a 3-letter company name, it gets two third of its revenues from outsourcing deals, much of its money come from government clients, and so on.

Never fear, Roach is here. We’re executing our strategic plan, we won’t rush into ill-advised merger because it’s what analysts expects us to do.

Having said that, I wouldn’t want to be an ACS consultant coming into a project when the merger will be completed. Let’s picture the conversation:

Consultant: I’m John, I’m a consultant with Xerox.

Client: We’ve been expecting you John, the copier is having a paper jam every time we’re using the legal paper tray.

Consultant: No, you’re making a mistake, I’m not a copier repairman, I’m with Xerox and I do consulting services. We're a new company now. I was told to report here this morning on a managed services project.

Client: The copier also says the drum needs to be serviced, which I don’t understand because it was serviced 6 months ago. You’ll notice that the glass is cracked, we’ll pay for this because it’s Jennifer’s fault – we told her no to sit on the copier during the last party and…

Proof is, ACS expects to sell copiers. Money quote from ACS CEO Lynn Blodgett: “With this combination, our tool box just got a lot bigger”. Yes, Lynn your toolbox now includes screwdrivers, toner boxes and cleaning cloth. Welcome to the Document Company.

Steve Ballmer called me

Ever since Perot Systems was eaten by Dell, the phone is ringing all the time with potential buyers for CGI. I mean, this is flattering but it takes lots of my time.

The legendary Microsoft CEO called me this morning, at first I thought we had forget to pay for our Gold certification, but no Stevie wanted to talk business. So you want to sell the barn, huh? We at Microsoft could be the best fit you know, we sell software to large corporations, and you rent slaves to the same customers, so you know maybe CGI and Microsoft could merge, of course you’d be renamed Microsoft Professional Services and we’d give you 3 times your salary and you’d report to me directly.

I must admit I was seriously tempted by the offer, I could picture Ballmer and myself touring our BUs with a classic monkey dance, daring our offices to raise their contribution to 20%. Microsoft/CGI would be a perfect alliance.

Ballmer reminded me that we shall consume our mutual love very fast, not wait for months like Jerry Yang did, because he’s now mowing lawn in Mountain View and Yahoo is the next Netscape so to speak. Microsoft Professional Service, Ballmer said, could be the flagship division that will push Windows 7 into all corporations. It’s so fucking complex to install, he said, we’ll make a bundle by selling hundreds of IT guys along with a single “Entreprise Edition” box. Software is just an excuse to shove high priced consultants down the customer throat, it was not Bill’s vision but I’m running the Death Star now. Then Ballmer exploded with a Mwahahahahaha laugh that sent chills to my spine.

Think about it Roach boy, he said, Redmond will be a nice place for you. And he promised he would call back in a week.

Great, now we're a shopping spree target

Great, this is again just great. Now that Perot Systems has been integrated into the soulless Dell Corporation, all analysts are now saying that CGI is a prime target for acquisition. Hello? Anybody home, this is other way around, we're actually trying to BUY someone. Truth is, our shares jumped 5.7% thanks to this news, and what makes our shareholder happy makes us happy. GIB has pretty much flatlined since Y2K, so we welcome any rumours that could push our stock upward.

The analyst said CGI could be valued at $20 to $30 based on Dell's offer for Perot, representing a very attractive upside of 65% or even more.

$30? Sweet smokin' Judas, my options will finally be worth something! Quick, let me call the Porsche dealership to put a cash down on a new Panamera.

You! Stop reading this blog and get back to work! We need more revenues to increase our market value. Do anything but do something! Offer customers to wax their car, CGI will send them a bill with a 10% discount. Check out trash cans for empty bottles, and bring them to your business unit! Maybe we could spin this as a green initiative and make a press release! Holy cow, I'm getting goose bumps! Quick, back to work!