Thursday, 13 March 2008

Cinderella will go to the Ball. IT infrastructure operators falling like flies

Yet another London-quoted IT company has received a takeover approach. This time it’s Dublin-based Horizon Technology. Horizon is an IT infrastructure company akin to Computerland which yesterday received a bid from Capita. Earlier in the morning Horizon had announced revenues up 12% at Euro288.2m with PBT of Euro8.1m. As you might expect, the share price has shot up - doubling to 90p as a result. This values Horizon at c£57m or a PSR of 0.25. That is about half of the 0.43 PSR of Computerland yesterday – but most observers would say that Computerland was a higher quality model.

Who is the bidder? Don’t know! But now it could be a BPO player or a competitor (like Specialist or Computacenter) or any ITO player or a telecomms player. The list goes on. It is interesting that IT infrastructure – so long a sector that I used to regularly refer to as the ‘Cinderella’ of the SITS sector is now getting lots of attention; albeit at pretty modest valuation metrics. It is a sector that is long overdue for consolidation and clearly ‘size really does matter’ here as the economies of scale and the extra discounts that volume can demand are crucial to success.

I remember when PC distribution was the original ‘Ma and Pa’ business. Indeed one of the market leaders in the UK in the 1980s was P&P which stood for ‘Pete and Pam’ the owners!

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