FT extends free access offer

I'm a regular user of FT.com but have always had to pay for that service. The price has come down from the £150+pa I was charged when it launched to £36pa now. But it looks as if that will be free now. A few weeks ago, the FT announced that readers who register could have access to 30 news items free per month. They would also allow free access to older items. (This is particularly useful to us 'bloggers' who put links to FT stories on our pieces only to find that after 24 hours readers cannot access them unless they, too, are subscribers)

Today, FT.com has announced a deal with Google (and 30 other partners) for its "First click free" service. Basically if you click through from Google, the "First click" doesn't count against your monthly tally.

Personally, I don't see why they don't make the whole lot free. It looks as if the WSJ will do just that now that Murdoch is in charge. Subscriptions for news services are really starting to sound so 'yesterday'. This might seem a bit alarming for someone who has spent 21 years building a business based entirely around subscriptions!

I should add that I was alerted to this from the excellent StrategyEye from MarketClusters. You can read their take on this story FT to allow free access from Google to their stories. I should also admit to being a shareholder in MarketClusters. I really rate their service very highly - which is the reason I became as shareholder in the first place. Currently, it's very Web 2.0 oriented. But I understand there are moves afoot to broaden the appeal. StrategyEye now tracks deals and opinions on over 10,000 companies globally– monitoring over 4,000 News and Blog sources every few minutes and indexing almost 40,000 digitalmedia stories daily – as well as the commentaries from their growing team of in-house analysts. I see some ex-Ovum people have recently joined. StrategyEye are currently offering a month's free trial.

Footnote - Some readers might note an inconsistency between my comments on free access and subscriptions. Personally I do think that StrategyEye should make their daily "free" and get their revenue from advertising. That doesn't mean that their more 'in-depth' analysis cannot be available only on subscription though. Indeed, any old Holway followers will know that was exactly the successful model we followed with Hotnews (free) and the Holway Report (paid for).

NASDAQ at 2800

Doing the weekly share round up this morning, I note that NASDAQ closed on Friday at 2804. That's another 2.9% rise in the last week alone which makes 16.1% for the YTD. I had to track back to 25th Nov 2000 for the last time NASDAQ was >2800.

Over here, Techmark also did well with a 1.8% rise last week (15.6% YTD) largely as a result of the telcom sector where the FTSE Telcom index is up a massive 29% YTD with the Mobile subsector of that Index up 36.7%.

Blinkx

Buying Blinkx on their IPO earlier this year was not my brightest investment decision of the year. I'll leave it to Ian Spence of Megabuyte to review their maiden results. His comments hardly inspire me to Hold.

Business uses of social networking

I must admit that I still find the majority of senior execs in our (or any other) industry just don't get social networking. As I have said in my presentations and articles for a year now, most senior execs believe it has no relevance to either them or their businesses. I have long 'begged to differ'.

Anyway, for the doubters, I suggest they read the FT article Networking sites used to recruit. ATSCo found that 58% of IT recruitment agencies found social networking sites were more useful at filling IT vacancies than print media. "Facebook has more than 220 job advertisements for web designers and a further 166 for software and IT network managers in the London area alone". The Association of Graduate Recruiters found that 77% of its members believed that social networking sites would become one of their most important recruitment tools.

Microsoft has the bestest of weeks

Last week Microsoft stock soared by 16% to end at $35. That is the highest stock price (according to my records) in over 6 years since a brief post dot com rally in 2001. Indeed the fairest point to take is 11th April 00 when Microsoft shares closed at $35 on the day the bubble burst.

It might have looked as if the week had started badly for Microsoft as, on Monday, all the news centred on the EU being the “winner” in their long standing dispute. Ironically, I’d written an article that day on how companies should avoid court battles – almost at all costs. That Microsoft and the EU “compromised” in the end is a thoroughly “good thing”. So I’d actually put Monday’s EU agreement on the "Positive News" pile for Microsoft too. Just thank goodness that’s all over now and developers can get on with the job..

Then Microsoft announced its 1.6% stake in Facebook where the headline was the implied Facebook valuation of $15billion. As I said in my post at the time, a much better way of looking at the $240m investment was as a means of not only gaining an exclusive deal on Facebook advertising but also gaining some influence over the MyTop - what I believe will be the most important “Next Big Thing” around for the sector. It had a further advantage in keeping Google out…for now anyway. $240m is ‘chicken feed’ for Microsoft and I have absolutely no doubt that it was a good deal – even if it gets no return on its equity investment. (Bluntly, I doubt that too. Facebook has every chance of becoming the next Google – even more so with Microsoft's help. In which case I’d have liked the opportunity to invest in this round too!)

Then the crowning glory of the week came on Thursday when Microsoft announced its Q1 2008 financials (3 months to 30th Sept 07). Revenue growth of 27% was a real stunner – the best Q1 growth since 1999. We should remember that the whole global software market is only growing at c7% according to Gartner. Microsoft has long tried to remind us that it is now subject to the law of big numbers (small companies can record high growth but when you’re big and dominate your market it’s a lot, lot tougher)

Unusually, the good news in the results was across the board. The launch of Halo 2 powered the Entertainment & Devices business to a 91% growth to $1.93 billion in the wake of increased XBox sales. 85m copies of Vista were shipped powering the Client business up 25% to $4.14billion. The new Office suite is doing well too which helped the Business division to a 20% growth to $4.11billion. Even Online services (that’s the bit that includes MSN and Live) grew 25% to $671m but still made a loss of $264m.

I think this is the most positive article I have written about Microsoft for a long time (if ever!) I can and do ‘bash’ Microsoft too – but both the news and the results this week deserve positive comment.

And we should all remember that our industry is more dependent on Microsoft than any other company. They do well and it has a knock on effect on almost every sub sector – from Intel microchips to IT support.

European Technology Acquisitions in Q3 - Amendment

I have now posted the final version of Regent's Review of European Technology Acquisitions in Q3. There were also some minor formatting errors my Friday's post "reviewing the review". So if you want to see the corrected version - Click here.

European Technology Acquisitions in Q3

As most readers know by now, I joined the board of the holding company of M&A specialists Regent Associates earlier this year. But I’ve worked closely with Peter Rowell and the team at Regent for many, many years. I’ve often likened selling your company to putting your children up for adoption. In which case you really have to trust both the people and the expertise of the ‘adoption agency’ you use! I guess that’s why my association with Regent has worked so well over these years and why, indeed, I choose to accept Regent’s invitation to join their Board.

Regent Q3 2007 Review of European Technology Acquisitions

I am delighted to bring HotViews readers an exclusive preview of Regent’s Q3 2007 review of European technology acquisitions. (Just click on the link above to download the pdf document)

In its Q2 review, Regent suggested that M&A activity was ‘past the peak of the plateau’ . So it came to pass with the value of Q3 transactions down from $114.2billion in Q2 to $74.7billion in Q3.

Geographically, the slide in deal flow was most notable in the three most active markets – UK, Scandinavia and North America. Conversely Germany, France and Benelux reported “steadily increasing confidence”.

By industry sector, little has changed. Content and Media still accounts for the most deals. The software consolidation that Hotviews has reported on so often lately, means that software M&A is running at three times the levels recorded in 2000. There has also been a switch away from Systems Integration and vertical solutions providers towards those old ‘bellwethers” IT consultancy, training and recruitment/resourcing. These are sectors which have done quite well recently as results followers will know. ‘Bellwethers’ portend the future. So maybe shareholders are getting out before the weather worsens?

On the other hand, divestments from larger businesses tend to occur in the darkest of days. Back in dark days of 2003 these divestments represented over 50% of deals. In Q3 2007, the proportion was just 25%.

It’s also interesting to note that private equity backed acquisitions have slipped from a high of 16% in Q2 to 13% in Q3.

Valuations have shown a downward shift (average PE now is 17.35) whereas PSR (ratio to sales revenues) has risen slightly to 1.51. This is entirely consistent with the better profits recorded by the sector of late.

The future?

Looking to the future, there are a number of factors which could affect – indeed distort – the M&A scene:

• most observers are wary about the general economic scene but look to tech as a “safe haven in a gathering storm” .
• a downturn in the economy could increase divestments by larger businesses
• private equity has played a significant role in pushing up both prices and activity. Most observers believe they will have difficulty maintaining that in the near time.
• the latest reforms to CGT could distort the market by bringing forward sales to be completed by April 08. This might increase activity but depress prices. But it is interesting to note that Regent report no evidence of this happening…yet.
• consolidation will continue at particularly high levels in the software sector.
• so far consolidation in the IT services sector has been quite modest. Recent activity (eg Steria/Xansa) might well herald a period of increased consolidation activity at the higher end in particular.
• the rampant growth – almost exuberance – in everything vaguely connected with Web 2.0 will continue to provide M&A excitement .

But, rest assured, there are no indications that M&A activity will ‘fall off a cliff’ as it did post 2000.

Fuller information in the pdf document or contact Peter Rowell on prowell@regent.co.uk.

Capita loses London Congestion charging to IBM

IBM has won the renewal contract for the London Congestion Charging from Capita. This must be a huge blow to Capita as CC was a flagship contract which had enhanced their reputation and, indeed, they were looking to replicate it in other cities. Capita shares have already fallen 7% on the 'surprise' announcement.

IBM's five year contract for the operation of the Congestion Charging and Low Emission Zone will start in Nov 09. The existing contract was worth c£60m pa to Capita and was estimated (at £10m) to contribute about 3% of Capita's profits in 2009.

Graeme Craig, interim director of Congestion Charging at TfL, said: "IBM's submission to operate the London Congestion Charging scheme has been selected as it best meets TfL's operational and technical requirements. It was also the most economically advantageous, which is important as net proceeds from Congestion Charging are invested in transport within London. We expect to continue our excellent working relationship with Capita over the next two years".

More later.

Microsoft stake values Facebook at 'irrelevant' $15 billion

It has just been announced that Microsoft is to take a 1.6% stake (much lower than the 5-10% stake originally talked about) in Facebook for $240m therefore valuing Facebook at $15billion. In return Microsoft gets the right to sell Facebook advertising outside the US to add to its existing deal within the US.

It was obviously important for Microsoft to get this deal and therefore stop Google getting into Facebook. The WSJ article on the background to this deal Microsoft Bets on Facebook Stake and Web Ad Boom is worth a read.

Is Facebook worth $15billion?

If you applied 'normal' valuation metrics, that's 100x Facebook's estimated annual revenues of $150m or 500x 2007 annual earnings of $30m (apparently Facebook is already profitable...) But if Facebook does become the social networking site of choice and users triple in the next year or two (quite possible) then the valuation starts to look quite reasonable.

The other way of looking at the Microsoft stake is as a 'cost of sale' or 'soft kickback' as some call it. Paying $240m (chicken feed to Microsoft) to get a contract to be the exclusive supplier of Facebook's advertising might look very reasonable. Particularly if you put it in the context of advertising being of the utmost strategic importance to Microsoft and an area where they are extremely vulnerable to the domination of Google.

All this side-steps whether Microsoft will get any influence over how Facebook develops. As I have said many times, Facebook is as close as it gets right now to a decent social networking site but it still has many deficiencies - see my earlier post last night. Microsoft is a mature company which just might put those deficiencies right. If it did maybe, just maybe, it could lead to Microsoft owning MyTop. Just as Microsoft owned the Desktop. Just as Google owns the WebTop. That is a mighty prize.

Faceberry Mashes up Blackberry and Facebook - Headline from Information Week

In a way, this links to the other bit of Facebook news last night. Research in Motion (RIM has launched a Facebook app for the Blackberry. Facebook users can now use their Blackberry to receive messages and friends updates automatically - just like they do for their email accounts. They can do loads of other things, like take photos on their Blackberry and automatically upload them to their Facebook profile.

Mike Lazaridis (Pres. and CEO at RIM) said "Facebook is one of the fastest growing web destinations amongst Blackberry users and has become an important element in the evolving fabric of personal communications". Certainly I often use my Blackberry to access my Facebook account - even though it is a bit clumsy right now. Blackberries are predominately business tools right now - so this statement reinforces what I have been saying about the crucial crossover between social and business networking and the need to have one 'network' which might serve the needs of both. (I know this is controversial - see earlier entries - but "I haven't got where I am today by people agreeing with me")

Microsoft and RIM both have their roots in 'corporates'. I think the twin announcements from these companies last night, re: Facebook, gives further evidence that Facebook has reached a tipping point in terms of its acceptablity within the mainstream, particularly business, environment.

Influencer or Agenda Setter

I notice that several of my articles seem to have set off a debate on the 'influencer' issue. Duncan Brown proposes an interesting conundrum of what to do if two trusted influencers disagree under the title Facebook: Agenda setter or over-hyped? He points to an excellent article in the Economist - There's less to facebook and other social network sites than meets the eye - which Duncan infers contradicts my views on the subject. They do in that I would prefer one social and business network profile but with various access settings for family, friends, work colleagues, business contacts etc whereas Tom Standage at the Economist argues that there will be many, many different niche networks. Assuming Standage and I are "trusted influencers" then we clearly agree on the main issue - you have to take social/business networking seriously. i've been banging on about this for a year now and I hope/think I have played my part as an influencer in getting that message through at the highest level.

Steve Ellis at Newmarketing asks an even more difficult question - how do you measure influence? He kindly says that "in the pit of my stomach I instinctively know he (Holway) is a significant player" but says that he has "to measure his (Holway's) 'influence' in order to justify his inclusion in our client's relationship programs. Then I have to measure the impact of those programs to prove their value." I hope if he does find a way of doing that he will share it. It will certainly help in my quest to find how to 'monetise' this 'trusted influencer' thing.

Prince's Trust Winter Reception

The booking detail and forms for the Prince's Trust Technology Leadership Group's Winter Reception on 6th Dec 07 are now available. Click here.

It's being held at the magnificant Wallace Collection in Soho. All proceeds go to the Prince's Trust as we have secured sponsorship from Regent Associates and Liberata. Peter Rowell (CEO at Regent) and myself will be giving a fairly high level/light hearted view of where technology is heading 'tomorrow' - with appropriate theme music. I'll also be interviewing one of the businesses that the Prince's Trust has helped to create. But most of all it's a fantastic high level networking event - every other year has been a sellout with every UK tech CEO worth his salt attending. It's also open to partners who can have a private guided tour of the Wallace Collection if they don't want to listen to Peter and I. £250 per ticket, £400 per couple.

I'd just point out that the uptake for this event has been fantastic and (I really mean this!) if you do want to attend do it now - or you will be too late!

Telecity defies the odds and pulls off IPO

Yesterday the Times headline screamed Wary investors desert London IPOs with news of a substantial drop in the the number of companies listing on the LSE and AIM in Q3. Indeed, in our own sector, we had seen SmartStream pull its own IPO - although we now suspect they had more fundamental problems with the valuation they expected.

So today's news of Telecity's debut on AIM at 220p valuing the company at £436m and raising £96.3m (albeit a bit down on the £125m initially expected) is surely good news for the whole UK tech sector. Telecity is a Manchester data centre operator - a spin out from Manchester University backed initially by 3i and Oak Hill. Half year revenues of £46.1m and underlying profits of £10.3m imply a reasonable ebitda multiple of c12 on 2008 earnings.

Holway's Hotviews acquired by Pearson for £100m

Dream on, you say but...

Everytime I mention 'blogs' to serious tech CEOs they either glaze over or groan. Afterall the news and comment they have always trusted in the media comes from the FT, WSJ, Businessweek etc. A summary of the comments I have heard would be "Blogs are written by ignorant upstarts high on their own ego. They are misguided at best, dangerously erroneous/libelous as worst. They are a passing phase and best ignored".

The problem is that there are now globally (on my rough estimate) around 50,000 reasonably serious tech blogs. A fair few of them are written by highly respected analysts and influencers. Indeed, many of the stories that these self same doubting tech CEOs read in their 'trusted' FT, WSJ or whatever, probably came from a blog entry. Blogs almost always carry the news before other media sources. As I have said before, blogs can make (as they probably did with the iPhone) or break product launches and corporate reputations. Collectively, tech blogs get far, far more readers than all the tech print media added together.

In 1996 when I started HotNews, I didn't actually know I was blogging. The word did not get invented according to the OED until some years later. But Hotnews was a blog and, I will continue to claim, was the first UK tech blog. The launch of HotNews was undoubtedly a pivotal moment in the history of Richard Holway Ltd. Our sales took off as a result as we "punched above our weight" as many observed. Between the launch of Hotnews in 1996 and 2000 when I sold to Ovum, sales quadrupled. Hotnews made my reputation. How much of the five-times revenue valuation that Ovum ascribed to Richard Holway Ltd came from HotNews is difficult to determine. But Ovum took that model and launched it across all its service areas with EuroView. To many tech CEOs this was their main (only) personal exposure to Ovum. The model is now copied by most of its competitors.

Although I launched Holway's Hotviews earlier this year, I only started to make a noise about it a few weeks ago. I have been quite amazed at the success of the daily email version and the feedback I have received. It is not so much the quantity as the quality of readership!

For this reason, the recent extensive comment on the possible valuation of the leading tech blog - Techcrunch - really caught my eye. A recent report in the San Francisco Chronicle will give you a good backgrounder on Techcrunch. I quote "TechCrunch has a full-time staff of eight. This year, it hired a CEO. In August, 1.25 million people visited TechCrunch or its affiliated blogs at least once, according to comScore Inc. It brings in $240,000 per month in advertising, according to Arrington, and pulls in additional revenue from conferences and parties. Most important of all, TechCrunch is in the black".

$3m revenues, in the black and a staff of eight. So how much is Techcrunch worth? Well according to the pundits c$100m and the most likely buyer would be CNET. 33-times revenues is rather better than I achieved in 2000!

First instincts would be that such a valuation is crazy. But if you are in print media with declining sales and advertising revenue, getting into online news is not a luxury - it's a necessity. A point well made in the respected 24/7 Wall Street blog. What better way to get 1.25m readers and a trusted comment source?

I clearly need to look at Holway's Hotviews again in a whole new light!

Memories of 'troubled' trips to Belfast as Autonomy buys Meridio

I note that Autonomy, during their Q3 results presentation today, announced that they were to acquire Belfast-based Meridio and its enterprise Document and Records Management (eDRM) software. Today's Ovum EuroView piece - Autonomy to buy Meridio - gives a good overview of Autonomy's results and the strategic importance of this $41m acquisition.

For many years, in the 1990s and early 2000s, I made an annual visit to Belfast to give my "State of the IT Nation" speech to the Northern Ireland branch of the CSSA (or Intellect as it is now known). I went every year despite "the troubles" staying in the Europa - the most bombed hotel in the world. I really liked going as I always got a very warm welcome - probably because I was one of the few prepared to take the risks.

This all came flooding back when I realised that Meridio was basically a 'spin-out' from Kainos Software - who had sponsored so many of my Belfast presentations - and Teamware, the Document management and Process Division of Fujitsu. Kainos was itself a joint initiative by ICL, Queens University and ACT. Kainos has revenues of Euro18.5m and is still one of largest indigenous Northern Ireland software companies. Kainos founder - Frank Graham - went on to be CEO at Meridio and still serves on Kainos' board.

Belfast has two great universities producing just the kind of graduates the IT sector needs. During "the troubles" those students left for the relative peace of the mainland once they graduated. So it is particularly satisfying to see indigenous Northern Ireland companies now doing well and providing great career opportunities. I'm also pleased to see that, with Autonomy, Meridio will remain in UK ownership.

Microsoft v Apple

I’m just off to an Intellect lunch at Claridges to be addressed by Matthew Bishop Director of Business and Marketing at Microsoft UK. Gordon Fraser, who heads Microsoft UK was meant to be the speaker but had to withdraw due to “unexpected commitments”. I don’t think too highly of that! I still have to go to represent Regent (where I am an NED) who sponsor these Intellect lunches.

I was just comparing Microsoft’s share performance to Apple’s. Since 1st Jan 02, Apple’s share price is up 15-fold from $12.36 to $187 whereas Microsoft’s is basically flat. $27 on 1st Jan 02, $30.5 close last night. NASDAQ is up 40% in the same period.

In my post, Agenda Setters, on 17th Oct 07 I wrote “Microsoft makes little real effect on my life anymore. I likened them recently to the transmission system in my car. I know it’s important but I only really notice it when it goes wrong. From a performance and reliability viewpoint, there is nothing more I need. What really turns me on about my car is the styling (Microsoft doesn’t do ‘style’ as we all know) and the sexy gadgets”.

I guess that really explains it all.

Juicy Apple

Apple’s Q4 figures, released last night, beat all expectations. Revenues for FY07 rose 24% to $24b and profits were up a staggering 75% at $3.5b. Apple is benefiting from the ‘halo effect’ as iPod devotees realise that the same style can be found in the iMac too. iMac sales rose 34% in Q4 to 2.16m units (7m for the year) and now represent 50% of Apple’s revenues. Apple sold 52m iPods in FY07 – up 30% on FY06. Even the very recently introduced iPhone exceeded expectations with 1.12m units sold in the quarter; 1.39m sold since the launch on 29th June 07.

As I wrote last week, Apple shares had already doubled this year and were the best performer (by far) in the ‘Holway Portfolio’. After a 2.3% rise before the bell, Apple shares surged another 6.8% in after hours trading to $186.21; that’s a rise of 115% since the start of the year. Interestingly, if that price is maintained today, Apple’s market value at $163b will exceed IBM’s ($156b) for the first time.

Most readers will know I have been an ardent Apple fan since 1983 when Apple UK lent me a pre-release Lisa for the weekend. It blew my mind away. When the Mac was released in 1984 I tried (unsuccessfully) to get Hosykns (and the corporate world in general) to adopt it. But “real men didn’t do mice or gui’s”. When I formed Richard Holway Ltd in 1986 (where we were totally Mac driven for 14 years) my first assignment was with Apple UK. I well remember that they presented me with a market research report which showed Apple with a 1.5% share of the UK corporate PC market. This report had “subject to a margin of error of + or – 3%” in small print at the bottom!)

I’m not sure what share of the corporate market Apple now has – maybe it is little changed. But according to figures from Gartner yesterday, Apple now has an 8.1% share of the US PC market trailing only Dell (29.1%) and HP (25.7%). That’s a remarkable achievement.

The all-important holiday season is just starting. In the Holway household, the debate is hotting up. “Do you want an iPhone or an iPod Touch?” Whatever, Apple should be in for a good Q1 too.

Catching my eye

Three articles today really caught my eye and are worth reading

Anatole Katetsky, in the Times, is one of my favourite, most respected economic commentators. His Black clouds loom on the horizon after years of plenty is pretty scary stuff. The main body of the article points towards some very difficult times ahead. Anatole ends with "Which brings me finally to the “unknown unknowns”, which have suddenly made the economic outlook for Britain even more uncertain, but also more alarming. All of the policy U-turns of the past few weeks, the random and uncoordinated tax reforms, ............. Suppose the recent tax reforms blow up in the Government’s face and end up yielding less revenue than expected.
After the events of the past few weeks, it is easy to imagine such “unknown unknowns” – and all of them spell bad news. "

Of course, the "random and uncoordinated tax reforms" referred to relate to the CGT tax changes that so embittered us - and many others. A meeting is being held today with Alistair Darling and CBI, IoD, BCC and Federation of Small Business. Can Darling really risk a U-turn? Mind you it would be nice if Digby Jones said something publicly in support of the universal business opposition. Digby is not known for his restraint but now that he has his peerage and, having accepted the Govt's whip, must clearly keep his mouth shut. But I thought Digby's new role in Govt. was to SUPPORT business? Shame on you Digby!

Finally, anybody who cares about the state of UK IT and the education of our children, will be both interested and support the "Revitalise IT programme" outlined in the FT today. (No link available - will post when it becomes available on the FT.com site) "The IT professional workforce has almost doubled in the past 12 years from 550,000 to around 1m, but the number of students choosing to take IT-related degrees has halved since 2001".

This is something I have been banging on about for many years. Indeed I served on a workgroup last year which Logica's Martin Read and the CBI had establshed to investgate and put forward proposals to help arrest this. The IT industry should shoulder its share of the blame for this situation though. For many years the very companies quoted in the FT article had abandoned their UK graduate recruitment programmes. Still, better late than never, I guess.

Going to court

The FT today carries a good in-depth feature on the BSkyB court case against EDS. (EDS to address charges it deceived BSkyB) The article puts much of the blame on the debacle on BSkyB.

Over the many years that I have covered the UK IT services sector, and EDS in particular, I have seen many threatened (and a few real) court battles over IT projects. In my private conversations I have always advised companies to settle out of court if at all possible. The reputational damages - regardless of who wins or loses - are huge. In the current case, I am sure that many readers will say "EDS getting sued again..." even those the article in the FT is clearly on EDS' side. The costs are not just measured in £s but in the enormous amount of time and emotional energy expended by the executives involved.

There just must always, and at whatever late stage, be a better way than appearing in court.

Too many social network sites

Perhaps it is not the phenomenal increase in the number of active members on Facebook, Bebo, Myspace etc that we should be tracking. Perhaps the real phenomenon is the sheer number of new social networking sites that seem to get launched everyday. The Sunday Times announced that Mothercare will this week launch Gurgle.com (I really like that name!) - a social network for new parents. You can enter your expected "Date of Birth" and link to other parents in your locality expecting at a similar time.

The FT today gives news of resistance (Fear and Loathing on Facebook) to the new social networking craze with the launch of sites like Enemybook.com, Snubster.com and Hatebook.org.

As I have remarked before, I do not think people want to create loads of different social (or business) networking profiles. Personally I want just one which has different bits of it accessible to family, friends, work colleagues and business contacts. The company that comes up with this is on to a winner. But I think the proliferation of different sites is both a turn off and, to me anyway, a really good indicator that the social networking 'craze' might be nearing its peak.

Tech "safe haven in the gathering storm" - Part 5

Commentators are using yesterday's results from IBM and Intel as examples of Tech resilience on display . As the guys from Businessweek conclude "It all depends on what the consumers do over the holiday period". I think I might have said something like that myself many times before recently. As you know, my concluusion is that consumers are more likely to give up going out than the gadgets that entertain them at home. But, I suppose if your home gets repossessed, the argument wears a little thin.

In other words as they stand I think tech WILL be a safe haven in the storm. But if the storm gets very much worse, tech will get blown away too.

Footnote - Writing all this about 'storms' brings back memories of the hurricane which hit our garden 20 years ago yesterday. It was a wipe out. We were told to leave many of the trees where they fell. Some have regrown and and are quite mature now. Others have provided habitats for many of the garden's wildlife. In other areas, the new tree planting is looking good again. Although it was terrible at the time, actually today the garden looks better as a result of "God's own pruning".

Apple doubles in Holway portfolio

One of the joys of leaving Ovum was freeing myself from the usual constraints on share ownership that applies to analysts. In January, I bought a new portfolio of shares and I have reported on its progress regularly.

Today marked a very special milestone as my Apple shares are now double what I paid for them!Logic says I should sell. But logic said I should have sold when the gain had reached 50%.

Indeed, as of today, the “Holway portfolio" is showing a 16% gain since 1st Jan 08. The other best performers are Axon (up 44%), RCM Technology Trust (where I am a director – see previous posts - up 22%), Vodafone (up 19%) and Capita (up 10%). All the rest are single digit gains except….

I’ve admitted to buying Blinkx on their IPO but it was a very “small holding”. I moved out of EDS, after suffering a 20% fall, into Sage – which has managed a 6% fall since I bought them a month back!

But overall, a 16% gain is pretty satisfying as a first attempt at this investing lark. Even better return than the Northern Rock. Just had my pension statement where the managed fund has managed a mere 3% growth this year.

Goodbye Xansa

Well, that’s not exactly true but today marks the completion of the £456m acquisition of Xansa by Steria which was first announced in July 07. This means that today Xansa has delisted from the LSE.

Steria says that the integration will be completed by 1st Jan 08. John Torrie takes charge of the combined Xansa/Steria operations in the UK. Two other Xansa execs, Mukesh Aghi (Indian CEO) and David Leigh (Group BPO director) join the Group Steria Executive Committee.

Steria says “the new Group reinforces its position in the top 10 IT Service providers in Europe (1.8bn euros revenue with more than 18 000 employees ), and propels it to a number nine position in the UK IT Services market.” One of its key differentiators now is that 25%/5000 of its workforce is based in India. This is one of the legacies of the foresight of the now departed Dame Hilary Cropper who moved what was then FI Group into India over a decade ago.

It is always sad for me to write of another UK IT services company falling into foreign ownership and, as the shipping forecast says, “losing its identity”. This morning I wrote of Systems Designers/SD-Scicon. I could add Hoskyns, Istel, CAP, Data Sciences, ICL etal to the list of UK IT services “has beens/could have beens”. It is rare that I write the story the other way around which is why I really hope that Andy Green can do something with Logica when he joins in the new year.

But I have the fondest of memories – particularly of the Cropper era. We had the most ‘robust’ discussions in the 1990s and I really do believe I had an impact on their strategy – particularly in their move to Application Management and later BPO. Cropper was just so refreshing. She understood the ‘game’ and made sure that you were told a sufficient number of ‘confidential snippets’ to ensure you stayed onside. She’d ‘phone the evening before any announcement was made to make sure I understood what a good thing the announcement was to be! Something that stayed in place even when Xansa was a listed company.

I well remember the IIS acquisition back in 1996 which laid the foundation for the Indian push. The fact that I claim to be an early convert to the offshore model has almost everything to do with Hilary! She made everything personal – from the frequent hand written messages to the long lunches. To be fair, I think I had a pretty close relationship with Alistair Crawford too…but it clearly wasn’t the same.

FI Group/Xansa, with its early emphasis on homeworkers, the outsourcing of application management and offshoring was, on multiple occasions, “ahead of its time”. That it is now French-owned is even more “gauling”. If we can beat them at rugby, why not IT services?

Swinstead steps down from Parity

Philip Swinstead has stepped down from his role as Deputy Chairman at Parity.

Swinstead is one of a rare breed of UK IT services entrepreneurs to make it really big. Although he is now most associated with Parity, it was his role as the founder of Systems Designers in the 1960s for which I will truly remember him. Systems Designers went onto acquire SCICON and SD-Scicon was the foundation of EDS UK - now the UK's largest IT Services player. Indeed many at EDS - like Bill Thomas - date from those Swinstead days. Parity was a 'second coming' for Swinstead. In 1993 he spotted that IT staffing (ITSA) would be big but was highly fragmented on the supply side. He brought together a host of smaller IT staff agencies to create what was to be known as Parity. Its zenith time was in the build up to Y2K. But after that, like all other ITSAs, it really suffered in the downturn. Unfortunately ill health hit Swinstead but he really came back in every sense and has seen Parity really recover.

I wish Philip and Parity every good wish for the future.

Agenda Setters

I thought you might be interested in the Silicon.com Agenda Setters 2007. I did have an involvement by inputting my views and suggestions but I wasn’t on the panel. That task fell to my friend James Bennet from E&Y.

When asked, all those months ago, I admit that I put Mark Zuckerberg from FaceBook top of my list and it seems I was not alone. Zuckerberg is the out and out winner. My other obvious suggestion, Steve Jobs, is at #2. I am particularly pleased that Ashley Highfield from the BBC is in there (again) at #5. I thought I was the only one who appreciated what he had done to bring the Archers to me, first, by “Listen again” and now by Podcast. Also the inclusion for the first time of names from India like Nandan Nilekani (Infosys) and Azim Premji (Wipro). I had the honour of a very long one-to-one interview with Premji recently and I came away with a feeling a great respect for this proper gentleman.

You should also note the inclusion of two bloggers on the list. Michael Arrington (TechCrunch) and Cory Doctorow (BoingBoing). Like it or loath it, blogging is highly influencial today. I don’t think a lot of companies really get that. Many I meet still think the bloggers are an irrelevant irritant. But they can make or break reputations faster than any other media. Anyway, bloggers are an important feed into the established media nowadays

Perhaps the most interesting feature though is the ‘omissions’. Bill Gates and Steve Ballmer are nowhere to be seen. Bluntly, that resonates with me. Microsoft makes little real effect on my life anymore. I likened them recently to the transmission system in my car. I know it’s important but I only really notice it when it goes wrong. From a performance and reliability viewpoint, there is nothing more I need. What really turns me on about my car is the styling (Microsoft doesn’t do ‘style’ as we all know) and the sexy gadgets.

CGT Campaign gets 10,000th signature

I note that the e-petition supporting the CGT Campaign has just got its 10,000 signature. Amazing in such a short period of time. Everyday, there is a leader in the serious press about this. So the pressure for a U turn is significant.

You can read the replies to my own emails to various politicians in the Comments section to the original post on the site.

CGT campaign gathers strength

Very pleased to see that the campaign to get the Govt to reverse its shortsighted and ill conceived policy to scrap the favourable CGT treatment for entrepreneurs and their staff, is gathering pace. A letter from British Chambers of Commerce, the Confederation of British Industry, the Federation of Small Businesses and the Institute of Directors has today been sent to the Chancellor.

The Number 10 e-petition that I mentioned last week, has now amassed a pretty impressive 5700 signatures.

Princes Trust Winter Reception - 6th December - Save the Date

Just thought I should ask HotViews readers to put the evening of 6th Dec 07 in their diaries. it's the Winter Reception for the Prince's Trust Technology Leadership Group where I am both one of the founders and currently the Chairman.

It's being held at the magnificant Wallace Collection in Soho. All proceeds go to the Prince's Trust as we have secured sponsorship from Regent Associates and Liberata. Peter Rowell (CEO at Regent) and myself will be giving a fairly high level/light hearted view of where technology is heading 'tomorrow' - with appropriate theme music. I'll also be interviewing one of the businesses that the Prince's Trust has helped to create. But most of all it's a fantastic high level networking event - every other year has been a sellout with every UK tech CEO worth his salt attending. It's also open to partners who can have a private guided tour of the Wallace Collection if they don't want to listen to Peter and I. £250 per ticket, £400 per couple.

More details later but if you want to lodge an early booking, please send me an email at rholway@holway.com.

Tech indices hit 2007 highes

You might have to pinch yourself,, but both NASDAQ and the Techmark hit 2007 highs last week. NASDAQ, at 2805, is now up 16.2% on the year (indeed it is up nearly 4% in October alone) and Techmark hit 1750 on Thursday - up 15.5% on the year. Vodafone is the largest ingredient of Techmark and its shares have done (recovered) really well - up 27% in 2007 YTD. These gains compare with an 8.2% increase in the FTSE100.

I have said several times before in HotViews that, in the past, tech acted as an 'amplifier' to general stock swings. Does extremely well in good times, does awfully badly when the general market turns down. This time, tech has bucked that trend. Many believe that tech is a safe haven in the storm that lies ahead. I am becoming increasingly of the view that this is the case. I see consumer tech spend (the main driver of the recent rallies) holding up even if there is a more general downturn. People will rush to their games consoles, iPods and home entertainment gadgets as solace when they can't afford the holiday or restaurant meal. All things that feed this stuff into the home - Cisco would be a good example - should do well too. We all know that enterprise IT is a tough place to be. But it has been such for seven years now and we are all used to it. Consolidation (and haven't we seen a mega week for software consolidation!), cut cutting via offshoring etc should provide good stock buying opportunities.

As readers know, at the beginning of 2007 I joined the board of what was then Finsbury Technology Trust - which had significantly underperformed the market and its peers. One of my first tasks on the board was to help select a new fund manager - Walter Price and his team from the $3b US RCM Technology was selected and we are now known in the UK as RCM Technology Trust plc (RTT). The fund has been realigned into larger global tech stocks. The performance since has been exemplary. Since RCM took over management of the fund on 1st May 07, the NAV is up 19%. We also undertook a 5 for 1 Subscription issue. So shareholders on 1st May are now similarly looking at a 19% increase in their investment. This has beaten all the tech indices in the period and is miles ahead of the performance at comparable tech funds like Polar and Herald. It's been an interesting - and rewarding - experience for me. Just hope it continues!

Holway's Hotviews via email

I have had many requests to produce a daily email version of HotViews. I've just enabled Feedburner's email service which you can subscribe to from the Hotviews main site by entering your email in the box on the lower righthand side.

You will then get an email once per day - obviously only if I write anything!

Footnote - What really amazes me is that all these services are now 'free' from Google. I remember the high cost of setting up first the very first Hotnews website back in 1995 and then enabling the daily email service in 2000. OK, I know that Feedburner lacks some sophistications but the fact that it has taken me about 10 minutes to add the feature is also worth remembering.

An everyday podcast of country folk

The BBC has today launched a podcast service for The Archers.

Many readers will know that I am an ardent Archers fan. The reason why they may know this is that I have used it over many years in my "Martini Moment" objective. Basically, back in 2002, I said that my "Martini Moment" would be the ability to access the internet and listen to The Archers "Anywhere, anytime and on any device". This was before the BBC launched their "Listen again" service when I had to time my life carefully so I was available at 7.02pm to listen 'live' to the latest episode. The Archers on the BBC Listen Again service was launched in 2003/4 and is now downloaded by 1m every month - the most "listened again" BBC programme by far! It has changed by life. WiFi and, any decent mobile connect card, enables me now to listen to The Archers anywhere I might be in the world at any time and from a multitude of different devices.

Now my Martini Moment ambitions have moved to video. Ie being able to watch Coronation Street "anytime, anywhere and from any device". Although I am close to a "watch again" service for most broadcast TV, I still really need a fixed line to do that. WiMax and other advances are making the mobile moment move closer.

My main Martini Moment desire right now is to "Listen again" in my car. Surely it must be quite simple to internet enable car systems? But that's where the Archers podcast will come in handy. I can see me downloading a missed episode to my ipod to listen in the car or on an aeroplane journey.

So for all of you who 'boo' everytime I mention the Archers in my presentations, get ready to 'boo' for some time yet. The Archers is an excellent example to use of the continuing progress of new media. Should the BBC ever allow advertising, The Archers has a dream audience. 4-5m regular listeners. Most of them in the very highest ABC1 groupings. Most of them older than 35 (Given that The Archers is now 50 years old, it does show that today's many young detractors WILL become listeners when they get a bit more 'mature') What the download figures also shows is that The Archers audience is both the most IT savvy and most willing to embrance new ways of broadcasting.

Footnote - As I wrote on April 1st, The Archers was the first ever 'live' reality radio programme. It was the first programme, back in the 1950s, to put microphones throughout Ambridge to record all the goings on throughout the day - a forerunner to the techniques employed today by Big Brother and many other reality TV programmes. At 6.00pm these recordings are collected and a team of BBC sound editors produce a 15 minute digest for broadcast at 7.02pm on Radio 4. Listeners appreciate that this technique ensures that the programme includes topical discussion of blue tongue and foot and mouth as well as comment on the latest football scores.

Gordon Brown and Darling want to tax dreams

Excellent article by Dragon's Den Doug Richard Gordon Brown and Darling want to tax dreams in today's Daily Telegraph.

Big Eats Big continues - Oracle bids $6.7b for BEA Systems

The buying frenzy in the global software market continues to gather pace. Hot on the heels of SAP's bid for Business Objects (see "US obesity spreads to Europe" below), Oracle has just announced a $6.7b offer for BEA Systems. On my count that makes well over $30b that Oracle has spent on M&A in the last couple of years.

The bid, at $17 a share, is unlikely to see the end of the affair as BEA Systems shares have shot up to £18.15 which means the market is expecting a rival bid. This bid seems to have been triggered by activist shareholder - Carl Icahn - who threatened action if BEA System's board did not put themselves in play.

I was interested to read the comments of Katherine Egbert, an analyst from Jefferies & Co, who said that if the company was acquired by Oracle "they could probably fire everybody except the engineers". As few BEA Systems engineers read HotViews... I suggest you brush up the CV.

CGT campaign

On Wednesday, I fired off various emails to politicians "venting my spleen" about the retrograde steps to increase CGT on business assets.
The response has been interesting:

• Jeremy Hunt - my local Conservative MP - replied within one hour
• David Cameron - Leader of the Conservative Party - replied within one day
• Gordon Brown - Labour Prime Minister - awaiting reply
• Stephen Timms - "Small Business" Minister - awaiting reply

I'll keep you posted on progress. You can read the replies received to date on the Comments section of my original post.

I note that the Number 10 e-petition (see below) has so far received 1287 signings. Let's hope someone takes note...

Sign the Number 10 e-petition to save CGT

I commend you to sign the petition setup on the Number 10 website to save CGT for entrepreneurs.
Every little helps!
See the response from my own MP below (comments to first story)

Trusted Influencers

A few weeks back I went to lunch at BT Centre with Francois Barrault - the new CEO at BT Global Services. I thought it was a private lunch but I was met at reception by Michaela Lowe who heads global analyst relations at BT. Always good to speak with Michaela, of course, but I queried why I was to be given such an 'escort' for a private lunch and conversation. After all I'm not with Ovum anymore. Michaela replied "because you are still one of the most important influencers in our sector". Note the word 'influencer'. Not 'analyst'.

This struck a bit of a chord with me because I had been reading an exchange between Duncan Brown and Anthony Parslow (the new CEO of Ovum) posted on Duncan's blog . Duncan is big into the power of the influencer. Duncan, rightly in my view, points out that influencers are people not companies or organisations. They might work for Gartner or Ovum but can be just as effective if they don't.

For 20 years I've been quite content - actually proud - to be referred to as an analyst. But, to be blunt, anyone can be an analyst nowadays. The tech world, in particular, is awash with analyst views. 50,000 or more blogs on tech alone. The analysts that just stick to the facts or regurgitate press releases are boring but pretty harmless. It is those that try to be controversial that do the most damage. Their misinformed rumour and speculation now gets picked up the 'serious' media and hence you get stories like Infosys buying Capgemini.

• Any fool can be an analyst
• Any fool can get to meet a tech CEO...once
• Any fool can be a controversial analyst.

But it is rather difficult to be a fool AND an influencer. For a start you have to invest lots of time in meeting people. You have to meet them multiple times in multiple locations and on multiple topics before you start to influence. By that time they will have worked out if you are a fool! Influencers are far more likely to be interrogated by CEOs than to interview them. Influencers learn far more from the questions they get asked than the answers they are given. You really would be amazed how many times I get asked "So what do you really think of company x?" only to twig quickly that a takeover is in the offing. CEOs are more likely to expose their problems if they think you could help with the solutions.

With influence goes trust. Indeed, I'd really aspire to be described as a trusted influencer. But this means that you can write publicly about little that you learn in such exchanges. You can do it once - but you will never get the chance again. But what happens is that the generality of what you right is truly informed. Much easier to say "I believe there will be some Big-eat-Big M&A in the global IT Services space soon", if you actually know that there will be! In early 1999, all my CEO contacts were telling we in confidence that their business had hit a brick wall because of "Y2K Lock down". Later that year, they explained how fearful they were of 2000. In the circumstances, the plaudits I got for my much (re)quoted "Y2K microclimate", "There may be troubles ahead", "The Y2K hangover will not end with the alka selzers on 1st Jan" etc were more down to my position as a trusted listener than as a brilliant analyst.

The problem with being a trusted influencer, however, is how you 'monetise' it. At Richard Holway Limited and Ovum, buying our reports was the membership fee' to that influencer inner sanctum. I don't actually think too many CEOs actually ever read a Holway Report. But they understood the game. That's why sales continued unabated through the good and bad times. You actually need the trusted influencers even more when things are going really badly!

Without inciting the wrath of Anthony Parslow, I think the real problem with Ovum post Datamonitor is that it has lost most of its very best influencers. Many CEO-type customers are asking "Why buy the service if the influencers I liked best aren't there anymore?".

Trusted influencers can go it alone. I know many who have. Indeed I myself (as Michaela from BT testified) am still a trusted influencer because of the many CEO meetings I still hold everyday, because of the comments I make here that get picked up by the media, because of the presentations I give etc. But people don't actually pay anything for that anymore (have you ever tried charging a CEO £5000 for him to take you out to lunch?) And I actually have nothing to sell anyway these days.

I'm not really complaining. I've made a bundle out of being a trusted influencer over the last 20 years and, of course, I get paid for the non exec director roles I now hold. But if anyone knows of a decent way of monetising the trusted adviser role, please tell!

Sage - "Shooting the top dogs"

Sage has announced that the CEO and CFO of its US operations - Ron Verni and Jim Eckstaedt respectively- have left the company with immediate effect. "Following a review of its North American business, the board has concluded that a change in leadership is required to realise the full potential of this business." This is, of course, hot on the heels of similar management changes at Sage's US healthcare operations.

Elsewhere in the today's statement, expectations for FY07 seem to be at (or marginally below) expectations with revenues of £1158m. Outside the US, things seem to be progressing satisfactorily. But, as others point out, what happens in the US is critically important for Sage as it represents c44% of total sales.

The market really didn't like all this and Sage shares are down 5% today as I write. Indeed, Sage has been an underpreformer this year. Down 12% in 2007 to date against a tech market which has experienced double digit rises (NASDAQ up 15%, Techmark up 14%)

As readers know, Sage is one of only two Holway Boring Award holders. But maybe that's the problem. Maybe Sage has just got tired. Maybe it needs a bigger 'kick up the backside'. Maybe it would be better to court a bid or partnership - particularly one that would sort out the all-important US operations? Sage has such potential. It is the one and only flagbearer of software in the FTSE100. The country and Sage deserves better!

Venting my spleen on CGT

I see that I not only got quoted in the FT today E-Petition to vent small business fury but they reproduced my blog entry below in full. I daily get more amazed at the 'reach' and 'quality of readership' of 'Holway's HotViews'.

But I am even more amazed at the ignorance of our current Government in this new proposal to almost double CGT on the sale of business assets. My mailbag has bulged with complaints from the tech sector alone. Of course, this doesn't just affect the founders. It affects ALL employees who have options. It affects everyone in an SAYE scheme or other share ownership scheme. it affects all owners of AIM shares etc.

At 10%, the CGT was both fair and wasn't worth the hassle and expense of avoiding.

The effect of this will be:

- incentives to setup new businesses in the UK will be lowered. New small businesses are vital to the economy and are its largest employer. so unemployment could well rise as a result.

- business owners will devise ways of getting around the tax. Going offshore will become popular again (surely better 10% CGT than no tax at all?)

- "If you gotta sell, Sell now!" will be the cry. Expect a flood of private company sales to beat the Apr 08 deadline. this is both bad for the country and industry AND will distort the M&A sector.

If you feel as strongly as me then DO SOMETHING. Write to your MP, the chancellor or the PM. Join in the Downing Street e-petition or even join the Facebook Group setup for this purpose. Just don't sit and moan alone!

Darling almost doubles tax for budding entrepreneurs

So the largesse of those Private Equity bods means that us entrepreneurs will have to pay nearly DOUBLE the CGT when we sell our businesses. Darling, this afternoon, announced that from next April there would be just one rate of CGT - 18%. This compares with the current business asset CGT rate of 10% after 2 years. He's also scrapping all taper relief.

So you will pay the same rate on a short term speculative punt on Logica's shares as you would do if you sold your business after 20 years of hard graft and not inconsiderable risk. I campaigned long and hard to get the current regime introduced. First in 1996 with Kenneth Clark of the Tories and then, successfully, with Gordon Brown in 1997.

I believe that the reason why the UK is such a good place to form a new business is because of these CGT rates. I also think that most people do not fully understand what is involved in forming a small business. Nobody understands that your house is pledged against the business. I started my company back in 1986 utilising my credit card allowance to the full. I was personally liable for everything in the business until I sold to Ovum in 2000. Even then, I lent Ovum money to cover the payroll and bankrolled them in their difficult times. I think the 10% rate I paid on the gains I made were fair and reasonable. By the way, the same rate paid by the many Ovum staff in that period.

But if I formed a new business now, both myself and my staff would pay nearly twice the tax.

The only advice I can now give is that if you own a business or shares in a such a private business (including AIM) sell now whilst the rate is only 10%. Stuff your money in the Northern Rock (now that the Govt is underwriting all new deposits from today) and don't bother with any risky new ventures which might create new jobs and opportunity for this country.

A totally retrograde step Mr Darling. One which I and many other budding businessmen will not forget.

Green's appointment puts Logica up 10%

Andy Green's appointment as CEO at Logica certainly pleased the market. Shares are up 9.75% as I write; adding £230m to Logica's market value.

As a shareholder, I find that pleasing given the misery I have endured of late.

BT's Andy Green to become CEO at Logica

Must admit, Andy Green wasn’t on our list of candidates to take over from Martin Read at Logica. If you remember, Read had announced back in May that he would leave in Sept 07 when Logica issued a profits warning. Despite a decent period of notice, Logica’s headhunters failed to come up with a candidate. Jim McKenna was appointed acting CEO which promptly led to fellow director Didier Hermann resignation saying he couldn’t work for McKenna. So Green filling the CEO role is long overdue.

Green is a long term BT ‘staffer’ of 21 years service. From 2001 until earlier this year, Green was the CEO at BT Global Services. In April 07, Green was appointed CEO of BT Group Strategy and Operations. As such it was a pretty big job, embracing the design, build, operate and maintain functions of all of BT’s customer-facing operations (Retail, Wholesale, Global Services and Exact) As such Green was seen as a candidate for BT CEO’s Ben Verwaayen’s CEO job when/if he steps down. We will now wait and see who moves up to that role. Ian Livingstone and Francois Barrault would now be front runners.

So, is Green the right person to lead Logica? BT Global Services had revenues of over £9b – some three times that of Logica. But BT Global Services is a quite different kind of “IT Services” company to Logica. Its closest comparison is BT GS’ operations in the UK. Under Green, BT GS was slow to embrace the offshore model – just like Logica – and found itself under significant profit pressure as a result.

Understanding IT services has always come difficult for both Telecomms and IT hardware companies. They really are different! They require different management techniques and different performance metrics. We have long doubted that BT really gets these differences. Green will have an interesting induction to the world of IT services at Logica. But Green brings a strong brain and global big company experience.

Logica is the UK’s last remaining IT Services company of any size. Bluntly, we had thought that it might be bought by BT to create a global UK-owned IT Services player. Maybe that is still not completely impossible. Either way, we wish Logica and Green well.

US obesity spreads to Europe

In the last three years, Oracle has gone on a veritable feast - spending upwards of $25b buying its largest competitors. From JD Edwards, Peoplesoft, Retek, Siebel and Hyperion as well as a host of smaller companies (like Bridgestream and Netsure Telecom in the last few weeks)

Conversely, its "European" rival - SAP - has maintained a strict "build it in house" approach. Until today when it announced a friendly £3.3b bid for French business intelligence software company, Business Objects. At a 20% premium to Friday's closing price, most analysts thought it a "good" price which was unlikely to see any counter bid. Conversely, SAP's shareholders weren't so pleased - knocking SAP down c5% today.

It wasn't all that long ago that Microsoft and SAP admitted they had themselves been in discussion. Indeed, Microsoft and SAP are strong partners (jointly battling the mighty Oracle in the business applications space)

Of course, as we all know to our cost, making a successful bid is just the start of the journey. Integration is always more difficult than most expect. I'm not suggesting that Oracle is the master at this but, you have to hand it to them, they do have a lot of experience in such matters. SAP, on the other hand, are but virgins. Not just a virgin but a someone who said they would never willingly engage in such activity!

It's also interesting that "Big Eat Big" is now the 'norm' in software. But it still hasn't happened in IT Services. As I showed a few weeks back, the Top Ten IT Services players are pretty much the same bunch as 10 years ago (just the positions have been juggled) My guts tell me that we might be entering a stage where Software obesity spreads to IT Services. But, as I have often said, if you predict something long enough it always comes to pass!

BT and FON - the day after

Thought you might be interested in Mark Main (from Ovum) views on BT and FON. They are a very good foil to my early enthusiasm! To read Click here. BTW - reproduced WITH PERMISSION.

On the other hand, I am even more bullish over the plan. It actually got another boost today with the news that McDonalds was to offer free WiFi in all of its 1000+ UK fast food outlets. The FT also seems upbeat with its headline BT plans wi-fi world-beater.

I really can see Wi-Fi being used extensively by iPod Touch users outside the home. There is even talk of our train operator - SW Trains - making wi-fi available on its trains soon. That opens up huge opportunities for watching TV, listen again radio etc on the way to work. As well as answering the emails of course!

Is Fon the new www?

The brilliance of the www is that it is basically powered 'for free' by its users (well, by the ones that have servers attached to it anyway). It can grow in an (almost) limitless way and it's free to all.

Today, BT announced a deal which had echoes of the www to me. BT has taken a stake (referred to as 'substantial') in FON (where Google and Skype are also shareholders). BT Broadband customers can now join the FON WiFi network whereby they share a part of their home Broadband WiFi connection with other FON users. So that (potentially) adds 3m nodes to FON's WiFi network. In return for sharing their Broadband, they get free access to FON's 190,000 WiFi Hotspots worldwide.

The potential for this is huge. Take something like the new iPod Touch with its WiFi connection. You could now use that (potentially) across a huge swath of the UK (probably seamlessly throughout the whole of London). A 'free' connection which would allow VOIP calls too (hence the Skype connection) with no need to pay a mobile operator. Same applies to many of the new handsets (including the iPhone) which will connect to free WiFi wherever that is available.

Now that must be causing a shudder down the spines of the mobile operators. Perhaps BT will soon make up for Bonfield's 'mistake' of quitting the mobile sector when it sold Cellnet(now O2)

I am sure there are many issues to overcome but, to me, this is one of the boldest and exciting moves I've seen in a long while towards achieving Holway's ultimate "Martini Moment".

Weak, Strong and Nodding ties

Let's face it, the hottest topic at the moment is social (and business) networking. I was surprised to learn that such social networking had been the subject of academic research as far back as the 1940s - well before the internet, with sociologists like Mark Granovetter writing articles on the subject. I was alerted to this by an excellent article by Shiv Singh Click here .

Shiv wrote:
"Granovetter (1973) argued that within a social network, weak ties are more powerful than strong ties. He explained that this was because information was far more likely to be “diffused” through weaker ties. He concluded that weak ties are “indispensable to individuals’ opportunities and to their incorporation into communities while strong ties breed local cohesion.”

Granovetter’s doctoral thesis demonstrated that most people landed jobs thanks to their weak ties and not their strong ones. It was the people that they did not know well, the ones with whom they did not have shared histories and did not see on a regular basis who were of most help. This is because people with strong ties generally share the same pieces of information and resources. Therefore they are of less help to one another.

Similarly, Granovetter identified absent ties (also called nodding ties) – those ties that lack the emotional intensity, time, intimacy and reciprocity to even qualify as weak ties. Someone living on the same street that you nod to everyday is an absent tie. An absent tie is someone that exists in your life but with whom you have no connection whatsoever. That person is not helpful in the way that a weak tie can be."

The relevance of this is its importance to the current debate on the importance of social (or in the corporate world) business networking. Social networking sites like LinkedIn and FaceBook are really very good at "weak ties". Just look at your own "Friends" on such sites...the vast majority are not particularly good friends at ll. Indeed they are acquaintances that we have picked up at various "events" at various times in our lives. What Garnovetter says is that it is these "weak links" that are the MOST important for us in finding jobs, information, business references etc.

I have to say that this is exactly what I have found. A classic example would be this very article. It came about because I have a "Friend" on Facebook called Susan Scrupski. Susan is a renowned US analyst on our sector who I knew well in the 1990s but have had no contact with since. This changed when we found each other on Facebook. Susan is now into all things Web 2.0. To read Susan's blog Click here. Susan pointed me to the Singh article after a dialogue on Facebook. Susan is the classic "weak tie". I am getting huge benefit each day from the "weak ties" I have established on Facebook. Corporates have to face up to the huge opportunities they can obtain by allowing their 'knowledge employees' to foster weak ties in the work environment.

Blinkx

I bought a pretty minimal stake in Blinkx back at their May 07 IPO for two irrational reasons.

1 - I rate Mike Lynch (Autonomy's founder). Indeed, he's very involved in the Prince's Trust like me.

2 - I believe that video search will be a hot topic as people use the internet for all kinds of video-related activities - from home videos to Youtube to Video on Demand.

What I didn't do was look at any of the fundamentals. I.e. like whether Blinkx at its IPO price of 45p was actually worth £125m. Afterall it had minimal (c£1m rev) and profits were not expected until 2011. When trading opened, the share price went through the roof. But this was all on a 'technicality' as institutional investors in Autonomy who were given one Blinkx share for each Autonomy share, apparently sold their Blinkx shares on the first day of trading without realising that they didn't actually own them at that time. They had to frantically buy them in the open market to balance the books causing the share price to almost double. It, of course, fell back once they received their allocations and they sold. You do have to wonder at the intelligence of those that manage our hard earned savings if they make simple blunders like this!

Then I saw my Blinkx shares crash from 45p to under 30p.

Anyway, Blinkx came out yesterday with maiden interims at the top end of expectations. Still just £1.2m rev in the six months! But this was enough to boost the shares by 15% to 34p. "Our markets are growing extremely rapidly as online television becomes an integral part of daily life" said Suranga Chandratillake - the 29 year old CEO of Blinx.

Blinkx are in the 'gambling' section of Holway's portfolio. Bluntly I think someone (eg Google) will take them out ...soon. If that happens, it would be at a considerable premium to the IPO price. Conversely, if that doesn't happen, I won't be forced to sell the house.

The beer syndrome

Had a very interesting debate yesterday with one of the world's leading tech fund managers on the subject of my earlier post musing about whether consumers would stop spending on 'gadgets' as mortgage rates ate into disposable income and consumer confidence fell.

He mentioned the 'beer syndrome'. In 'recessions' not everyone suffers. Indeed some sectors gain. The 'beer syndrome' occurs because consumers are forced to stay at home and watch the TV rather than go out to restaurants, the cinema, clubs etc. So they buy more take-away beer.

This respected fund manager argued that home entertainment 'gadgets' and services would be the 'new beer'. "Let's stay at home tonight and download a video over the internet 'for free'". I.e. the home entertainment service providers and the companies that made the equipment which facilitated this, would continue to do well. He argued that the $299 on a new iPhone was not life threatening - indeed it's the kind of level of purchase that many people make to cheer themselves up. The same applied to much of the low cost home consumer tech stuff. Home PCs are in the sub $500 range now we should remember. He did concede that HD-DVDs etc might suffer. I.e. any consumer tech higher up the spending curve would be adversely affected.

By the way, we both agreed that 'enterprise' tech spend - almost across the board - was in for a tough time...

Smartstream IPO off

Just to close off our previous stories, Smartstream has effectively abandoned its plans for an IPO. Having reduced price expectations from £300m to under £200m, there was demand for further price erosion (possibly to nearer £100m) which clearly TA (Smartstream's PE backers) found unacceptable. We would expect a trade sale announcement soon. Once you have done all the IPO due diligence, it's just the time to quickly buy a 'clean' company.

But this cancellation will be a blow to the likes of Telecity, Sophos and others lining up for autumn IPOs.

We are clearly living in more difficult times.

Share Indices for September

Some interesting things are happening on the Stock Markets relating to tech.

In the UK, tech in general this month went nowhere. But that hides a double digit rise in Mobile.

If you look at the YTD figures (ie 9 months to end of Sept 07) you will see that the TechMark100 (and NASDAQ, by the way) are both showing double digit growth. But all the action has been in IT Hardware and Mobile. Now in the UK, most of the IT hardware stocks are consumer related - just like mobile. SCS, which is pretty much all "Enterprise", is up by a modest 2.6% on the year. Indeed, Support Services (which covers the BPO players and IT Staff Agencies and both exclusively supplying "Enterprise") is down 5% on the year.

So my contention is that tech stock market performance this year is 'consumer', not 'enterprise' driven.

If that is the case, what does that portend for the future?

Firstly, there is NO indication that 'enterprise' tech spending is increasing. Indeed both public sector and financial services IT spend (the two real 'enterprise' drivers in the last five years) is likely to have modest growth in the next period. Enterprise will not supply the lift.

So tech will have to rely on 'consumers' continuing with their appetite for 'gadgets' and the knock on effect that has on telco companies and the hardware manufacturers who supply equipment to them and other heavy users of the web.

And that's where I have serious doubts. Given the increase in mortgage payments which many face, will they choose an iphone or HD-DVD player over keeping up the mortgage payments? As house price rises falter will they take on new debt with such abandon as they have shown of late? As unemployment rises and bonuses in the City evaporate, will consumers keep on spending like there was no tomorrow?

Unfortunately, I think not. However, I realise that this is against the view of many who still believe that tech will be a safe haven in the upcoming storm. I hope they are right and my fears are unfounded.