Tieto Oyj - Company Announcement

Tieto redefines its strategy to focus and simplify; personnel adjustments to create a competitive cost structure started

Tieto Corporation  STOCK EXCHANGE RELEASE  20 March 2012, 8.00 am EET

Tieto launches its strategy for 2012-2016 with the objective of becoming the
preferred partner in business and IT transformation based on its strong
position in the Nordic countries. Tieto will build its competitiveness and
future growth through industry expertise, geographical focus and simplified
operations. Tieto will expand its capabilities to cover full IT lifecycle
services by investing in Consulting and System Integration (CSI). Product
Engineering Services (PES) will pursue global opportunities. In order to
improve profitability and price competitiveness, Tieto will drive actions to
simplify its operations and achieve a competitive cost structure by means of a
planned net reduction of EUR 50 million in the company's cost base. 

Full IT lifecycle services and industry focus as customer value drivers

Based on Tieto's long experience in selected industries, the company will
emphasize industry-based knowledge in its operations. The company will create
higher customer value by integrating industry knowledge with Consulting and
System Integration services (CSI), Managed Services (MS) and industry products,
including its own IPR. The company will expand from its strong position in
managed services to provide full IT lifecycle services to cover larger IT needs
and opportunities. Tieto aims to increase the share of CSI revenue from the
current level of less than 20% to over 25% of total revenues towards the end of
the strategy period. Growing CSI enables Tieto to increase its market share and
become more resilient towards price pressure. 

Focus on markets where Tieto can be among the Top 3 IT service providers

Within the current core market, the Nordic countries, expansion builds on the
company's strong position in Finland and Sweden. The company has decided to
revisit its expansion strategy outside the current core market. Tieto seeks to
continue operations in countries or expand to markets where the company has the
potential to be among the Top 3 vendors, has the ability to provide full IT
lifecycle services and sees a strong fit with its industry offerings. Countries
where the long-term outlook for EBIT is less than the company's 10% target will
be optimized for profitability and evaluated for potential exit. 

In Russia, Tieto will focus on supporting Nordic customers and locally on the
financial services and the oil and gas industries. A profit optimization
programme is currently under way in Russia and it is expected to yield positive
results during the first half of the strategy period. The scope of operations
in Germany will be reviewed during 2012. 

Product engineering pursues global opportunities in the connected world
transformation 

Tieto sees an opportunity to capitalize on the evolution of the connected world
by utilizing its strong position in Telecom R&D services, global delivery
capabilities and proven quality. Tieto has decided to operationally enable
Product Engineering Services (PES) to pursue its global customer base and
opportunities by reducing operational dependencies in the IT services business.
PES acts as one of the key sources for Tieto's innovation, future growth and
financial performance. The profitability of PES is expected to be in line with
Tieto's profit objectives during the strategy period. 

Improved profitability and quality essential priorities

Improved profitability and quality are top priorities during the strategy
period. Key sources for the targeted level of operating margin (EBIT) and
quality are as follows: 

  -- simplified operations to create a competitive cost structure driving a
     significant part of the profit improvement
  -- efficiency and quality improvements in managed services through automation
     and offshoring driving price competitiveness and contributing  to profit
     improvement
  -- growth of high-margin services in CSI enabled by investments in
     competencies for technology consulting and project management
  -- global expansion of PES
  -- rationalization of non-core country operations and product portfolio during
     the strategy period.

Simplified operations to create a competitive cost structure - personnel
adjustments started 

Tieto will continue to simplify operations and operating structure to create a
competitive cost structure with a view to achieving annualized net savings of
EUR 50 million by 2014. Around one fourth of these savings are anticipated to
affect operating profit for 2012. 

Improving price competitiveness requires reduction of overhead costs and
increased productivity across the company. Tieto has started Group-wide actions
to reduce non-customer centric work, cut overlapping tasks and improve
productivity. Additionally, the utilization rate is at an unsatisfactory level
in some businesses. The negotiations are expected to lead to a reduction of
about 1 300 employees of which close to 500 in Finland, close to 300 in Sweden
and around 500 in other countries. The negotiations with labour union
representatives will be started in accordance with the local legislation and
labour practices in each country. 

The planned redundancies are anticipated to account for a substantial part of
the targeted net savings and will mainly be implemented during 2012. The
one-off costs related to the planned streamlining actions are estimated at
around EUR 50 million, but will be specified during the negotiations. 

New financial targets for the strategy period 2012-2016

Tieto has reviewed its financial targets emphasizing profitability over growth.
Tieto aims to reach the following targets during  the strategy period
2012-2016: 

  -- EBIT margin of 10%
  -- EPS growth of over 15% (CAGR) as a long-term incentive target during the
     strategy period 2012-2016.

Additionally, the company aims at a minimum dividend payout of 50% of net
results and net debt/EBITDA ratio of less than 1.5. 

Total investments during the strategy period are expected to remain at the
average level of previous years. 

New structure

To support the company's ambition to combine its industry expertise with
integrated offerings (CSI, MS, industry products), Tieto will gradually
transition to the refined operating structure during the second half of 2012,
and officially adopt it as from 1 January 2013. The two dimensions of the new
structure are Industry Groups and Service Lines. To enable global expansion of
PES, it will be organized with reduced operational dependencies to the IT
services business. 

Kimmo Alkio, the President and CEO:

“The feedback from our customers, employees and shareholders has made it very
clear to us that we need to clarify our focus and direction, while taking
decisive actions to address our price competitiveness. Today, we are launching
our journey to make Tieto a trusted IT services partner in the years ahead. Our
capability expansion in Consulting and System Integration will also offer
exciting new career opportunities for our professionals. We anticipate that we
will maintain a high degree of focus on our 2012 operational targets, while
systematically transitioning to our refined operating model towards the year
end. Naturally, it is challenging in the short term to conduct the necessary
cost reduction activities, which are necessary to create better price
competitiveness and an overall competitive cost structure for the future. This
strategy will create a focused and simplified Tieto that is well prepared for
the future.” 

For further information, please contact:
Media and investors
Kimmo Alkio, President and CEO, tel. +358 2072 010

Investors
Lasse Heinonen, CFO, tel. +358 2072 66329, +358 50 393 4950, lasse.heinonen
(at) tieto.com 
Tanja Lounevirta, Acting Head of Communications and IR, tel. +358 50 321 7510,
tanja.lounevirta (at) tieto.com 

Media interview requests
Kia Haring, Acting Chief Marketing Officer, tel. +358 40 765 3700, kia.haring
(at) tieto.com 

Press conferences

Tieto will arrange two press conferences on Tuesday, 20 March 2012. The new
strategy will be presented by Kimmo Alkio, President and CEO: 

  -- Press conference in Finnish for analysts and media at Tieto's premises in
     Helsinki, address: Aku Korhosen tie 2-6, at 1.00 pm EET (12.00 noon CET,
     11.00 am UK time).
  -- Webcasted conference in English for analysts and investors at
     www.tieto.com/investors starting at 2.30 pm EET (1.30 pm CET, 12.30 pm UK
     time). Viewers will have the opportunity to ask questions online.

An on-demand video and presentation materials will be available after the
conference at www.tieto.com/investors. 

TIETO CORPORATION

DISTRIBUTION

NASDAQ OMX Helsinki

NASDAQ OMX Stockholm

Principal Media

Teto is the leading IT service company in Northern Europe providing IT and
product engineering services. Our highly specialized IT solutions and services
complemented by a strong technology platform create tangible business benefits
for our local and global customers. As a trusted transformation partner, we are
close to our customers and understand their unique needs. With about 18 000
experts, we aim to become a leading service integrator creating the best
service experience in IT. www.tieto.com