Monday, 9 June 2008

Logica according to George

As I know there are a few Logica watchers amongst the regular HotViews readership, I thought you might be interested in reading George O'Connor's (the Software and IT services analyst from Panmure Gordon) Morning Note on Logica today. To download the pdf Click here. It's best for you to read it direct as it contains forecasts and a Sell recommendation - and I don't do either of these on HotViews!

Basically, George thinks that "Logica has very little room for manoeuvre in a deteriorating operating environment and risks hitting debt covenants. Given concerns about falling day rates, declining utilisation and IDC reducing industry revenue growth forecast, [Panmure Gordon] revisited Logica forecasts to pose the question – what if?"

I'm afraid that George comes to a pretty similar conclusion to myself - and a number of other analysts. Ie that Andy Green's plan is "not radical enough; Logica remains the halfway house - too small to be large, too large to be small". If you reread my April views on Logica's Business Review I made much the same comment (indeed, it's been repeated by many others since):

"Logica’s problem is that they are Logica. They are a mid-sized player doing lots of different things in lots of vertical areas in lots of countries in Europe. They are a ‘mid-sized generalist’. For many years they have been a ‘mid-sized generalist’ and if Green’s plan is followed they will continue to be a ‘mid-sized generalist’.

If you have read Holway’s views over the last 20 years you will know that being a ‘mid-sized generalist’ is an increasingly uncomfortable place to be."

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