Friday, 16 May 2008

BT and "Goodbye Ben"

BT exceeded expectations in Q4 and reported revenues of £20.7b and EBITDA of £5.9b. It was rewarded with a 5.4% rise in its shareprice - the best in the FTSE100 yesterday. A good way to say "Goodbye Ben"

I was particularly ‘impressed’ with the performance at BT Global Services where revenues increased by 10% to £2226m; with revenue growth accelerating to 28 per cent outside the UK. However, they did get a bit of help from the strengthening of the Euro. EBITDA margin improved by 0.4 percentage points to 13.7 per cent in Q4 – so getting closer to the 15% target. BT Global Services said “This improvement was driven by the maturity of some of our large long-term contracts and some up front benefits from the transformation of our operational cost base through global sourcing and process improvement”.

Total orders in the quarter amounted to £2.8 billion, bringing the value of orders achieved over the last twelve months to £8.0 billion. These included an eight year outsourcing deal with Thomson Reuters to manage the WAN element of its internal IT infrastructure; a five-year outsourcing agreement with KPMG practices in the UK and Germany and a five-year outsourcing agreement by the BT/HP alliance with Nycomed.

BT Global Services seems to be ‘storming’ with its Network Management activities – particularly outside the UK. But, of course, it runs a more conventional IT services model in the UK. Can BT afford to run a different model in the UK than elsewhere? It is now less likely that they will extend the UK model globally. They would need to buy a Tier One IT services player to achieve that – and one of the main targets (EDS) has gone to HP this week. Indeed, that leaves questions over the BT/HP relationship in the future.

Finally, it was “Goodbye Ben”. A good sendoff in the FT today – Plaudits for Verwaayen’s success. Ben has been very good to me and, in the past, to my company Ovum. I shall miss his instant Blackberry reactions to any comments I make. As the papers say, he will be a hard act to follow. I wish him every good fortune in his new endeavours.

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