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Monday, 16 February 2009
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Posted by Richard Holway at 10:05
(By Anthony Miller). Though business in its EMEA and North American regions seems to be holding up, UK-based telecom billing and operations support system software player, Intec Telecom, is now seeing weakening demand in Asia and will cut costs accordingly. In its trading update (see here), management still expects 1H09 revenues and profits to well exceed 1H08 at constant currency (over 90% of Intec’s sales come from outside of the UK). At least management can fully concentrate on the job at hand without the distraction of last year’s takeover talks (see Intec organises for next growth phase).
Posted by Anthony Miller at 09:20
(By Anthony Miller). There are two ways to face a downturn: roll over and let it do its worst to your business; or meet the challenges head on and fight back. Fidessa chose the latter strategy and is scoring well on points. Despite (in fact, because) its products sit right at the centre of the financial crisis, Fidessa saw FY08 revenues grow 33% (proforma, constant currency) to £189m though operating margins trimmed 40 bps to 11.9% (see here). However, if you exclude its recent £1m patent dispute settlement, margins tricked up 10 bps to 12.4%, and that still includes the £0.6m Lehman’s write-off. Among the regions, Asia (13% revenues) was most profitable (43% segment margin), with Europe (50% revenues) least so (14.8% segment margin). North American segment margins were 20.4%, the only region which showed a gain (2007: 17.3%).
What seems to have helped Fidessa weather the storm is that it has multiple plays in trading systems, with business lines that address the buy-side, the sell-side, the provision of market data, and network connectivity. In addition, recurring revenues now comprise 77% of the total (2007: 72%), among the highest in the software sector. But of course Fidessa is feeling some pain; smaller customers are increasingly taking workstation-based solutions and pricing is under pressure. It’s also seeing a pick-up in its hosted (SaaS) models as customers look for other ways to reduce operating costs. However, so far Fidessa has only seen small impact on buying cycles and management believes that the very factors that are causing the financial markets turmoil will be just the factors that drive client need for its products. We think management have done an excellent job in sailing Fidessa forwards despite considerable headwinds, and we hope they long continue to do so.
Posted by Anthony Miller at 08:56
Sunday, 15 February 2009
(By Richard Holway) Sad as it may sound, I’ve been following Eidos since their USM (that was the precursor to AIM) IPO at 100p in Dec 1990. Britain may not have produced an IBM, a Microsoft or an EDS but we were rather good at computer games - and Eidos was the British standard bearer. For most of the 1990s I reported as they bought a dozen or so other games developers with names like Big Red Software, CentreGold and Black Dragon. But, above all, Eidos was known for the ‘improbably curvaceous’ Lara Croft of Tomb Raider fame Most computer games are spin offs from films – Lara Croft did it the other way around!
By the end of 1999, as the dot.com bubble reached its peak, Eidos had a valuation of over £1billion. As other British games producers got bought by the Japanese, Eidos remained doggedly British. Unfortunately the share price went south. Lara lost her charms and sales slumped this Christmas. Profit warning followed profit warning and there were risks that Eidos would breach its banking covenants.
Last week the Eidos board accepted a bid, valuing the company at £84.3m, from the Japanese publisher Square Enix, best known for the Dragon Quest and Final Fantasy role-playing games. The bid was at a 260% premium to the price Eidos traded at a few weeks ago before the bid was rumored.
Ten years ago Britain led the world in computer games. Although analyst group Games Investor Consulting claims that UK-made games were valued at £2 billion in 2008, the UK is now in danger of falling to fifth in the sector's global revenue rankings as Canada and South Korea are set to leapfrog the UK in the rankings. For some reason, HM Government seems to not recognise software development as either manufacturing or the creative arts. So other countries have moved in to provide better tax breaks.
Computer games are the ‘sexy’ part of IT – exactly the area that might encourage more young people to ‘Get into Computing’. Now it looks like it’s another sector where we have needlessly surrendered our lead to others. That must surely be lamented.
Posted by Richard Holway at 17:54