Back in the ‘good old days’ of Holway we used to have a rule whereby the term MEGA could only be applied to contracts worth in excess of £100m pa. So I can with complete justification and without exaggeration describe both Royal Dutch Shell's $4b IT contract AND each of the $1b+ 'sub' contracts signed with EDS, AT&T and T-Systems as MEGA CONTRACTs.
Under the terms of the agreement, EDS will manage Shell’s end-user computing services including desktop, service desk, on-site services, back-up and disaster recovery, mobile information protection and managed messaging services, for 150,000 users in over 100 countries across its global operations. 1500 Shell employees will transfer to Shell. EDS will also act as operational integrator, collaborating closely with Shell’s other key IT suppliers – Microsoft, SAP, Xerox, Sun and EMC.
Bill Thomas, Exec VP of EDS EMEA, was clearly pretty chuffed about the contract when I spoke with him – as well he should be! “New” contracts of this size (rather than renewals either with the existing supplier or a changed supplier) are becoming rarer as more and more of corporate IT has already been outsourced. The contract is also truly ‘global’. There are few outsourcing suppliers who could supply its services across such a wide geography. This is therefore a big feather in EDS – and Bill’s – cap.
AT&T will provide wide and local area networks, voice services, security solutions and mobility services in a $1.6b/5 year contract. AT&T will also deliver connectivity to Shell’s 1,500 corporate and operating units. AT&T will also manage 600 separate third party contracts with 300 vendors globally. As part of the arrangement, 560 Shell networking employees will become AT&T employees.
Deutsche Telekom unit T-Systems will provide Shell with worldwide hosting and storage services in a $1b/5 year contract. T-Systems will run Shell’s data centers including three in the Netherlands, one in Malaysia and one in the U.S and will host most of Shell’s SAP applications and more than 7,400 application servers. Shell will transfer 900 employees to T-Systems.
Monday, 31 March 2008
Mega contract for EDS, AT&T and T-Systems with Shell
Tom White resigns from Siemens UK
Tom White has resigned as CEO of Siemens UK. Horst J Kayser, who was previously the head of Corporate Strategy, takes over. Kayser has the title CEO of Siemens' North West Europe "cluster", a €9bn-revenue region for the company that encompasses the UK and eleven other countries.
It's been a difficult time for Siemens. Earlier this month they lost the DWP contract in the UK; which was one of the reasons behind Siemens' recent profit warning. As my (ex-) Ovum colleague Phil Codling remarked "the appointment of Kayser suggests rather closer control of the UK operation within Siemens".
Small meals for both Capita and Sage
Holway's two Boring Award holders both made small acquisitions today
Capita has acquired a small UK insurance services firm for £16.5m. Lancaster Insurance Services specializes in luxury car and holiday insurance (among other areas), and is forecast to generate £1.7m operating profit on £6.6m turnover for the year ended 31st December 2008
Sage has acquired software company Tekton Group Ltd for £21m cash. Tekton provides specialist construction software, implementation and support services to more than 230 companies throughout the UK & Ireland. Tekton had revenues of £4.5m for the half year to Dec. 2007.
This is typical of both Capita and Sage. Both companies have made several hundred of these relatively small acquisitions in the last 20 years. Although obviously a number have been a lot bigger than this one, none of their acquisitions have ever broken Holway's Acquisition Indigestion rule of more than 50% of its current size - indeed the vast majority have been under 10% of their then current maket value. Eating small meals, often is the best advice.
Of course, the wrong food can still cause indigestion - what ever the size of the meal! For Sage Tekron seems to be right on this count too. It keeps within Sage's current territory of SMEs and, of course, is in the UK. It's appeal is adding a new vertical to the ever growing Sage list of sectors covered. Capita is already active in the insurance broker sector so Lancaster is pretty run-of-the-mill for Capita too.
Other acquirers take note!
Share Indices in March 08
The misery continued in March. I guess the rate of decline was slightly less severe than in Jan and Feb - but the UK FTSE SCS Index still fell 2.63% making it nearly 12% YTD. The FTSE Telecomms index fell more steeply - down 3.7% in Mar/16.5% YTD.
Interestingly, it looks as if European tech stocks have now caught the bug. Note that the FTSE Euro Tech Index fell a massive 12% in Mar/23% YTD and the FTSE Euro Telecomms Index was down 8% in mar/22.6% YTD.
Conversely Support Services has consistently performed best - down just 0.7% in Mar/5.6% YTD. That compares with a 3.3% fall in the FTSE 100 in Mar/11.8% YTD. Capita, Serco, Xchanging etc are in the Support Services Sector and are, as I have said to the point of boredom, the safest havens in the current storm. Indeed as I said yesterday, outsourcing can tend to do even better during periods of corporate cost cutting.
The Londoner inside Intel
I must admit that I didn’t know that the next head of Intel was more than likely to be Lewisham lad, Sean Maloney (51). Mind you, his English (more precisely Irish) roots seem to be a long time ago - to the extent that his (third) wife is American as are his five children.
Excellent interview in the Sunday Times. In which Sean predicts that social-networking sites like Facebook will be “the predominant way people work with each other”.
Sunday, 30 March 2008
Mixed signals
Oracle said that an increased risk of recession had made customers more prudent in their technology spending. Cisco has reported slower corporate IT investment – particularly from the financial services sector. See Cisco signals trouble ahead in Fortune 27th Mar 08. Google reported that there had been slower growth in clicks to text ads, adding to worries about an economic slowdown.
Conversely, Accenture seems to be powering ahead. Latest results for quarter ending 29th Feb 08 showed revenues up 18% (11% in constant currency) at $5.61b with operating profits up 14% at $638.1m – an impressive 11.4% margin. (see report from my (ex) Ovum colleague John O’Brien Accenture continues strong growth in Q2)
Accenture seems to be one of those rare gems – a bit like Capita – which seem to do well ‘whatever the weather’. Its two best performing divisions – consulting and outsourcing – were both said to be prospering because of the cost cutting agenda. Outsourcing was particularly strong in the financial services sector and ERP consulting was strong as cost control in the supply chain increased in importance.
Accenture’s CEO William Green couldn’t see any reason to lower his market outlook as he believed the current environment would spur a ‘flight to quality’. Indeed the earnings estimate for the year was upgraded.
How can this be?
Some analysts seem to think that all tech companies behave in a similar manner to changing markets. As in “a rising tide lifts all ships”. Oracle/Google/Cisco/Accenture might well all be labelled ‘tech’ companies but they are really as different as chalk and cheese. Google relies on consumer confidence (currently waning). Cisco’s fortunes depend on ever increasing network traffic – be it from corporates or consumers. Again an area under threat. Oracle has one foot in the “we do well when corporates expand and install new systems" (clearly under threat) and the other in “we do well when corporates don’t install new systems but upgrade their current Oracle-based systems” (clearly still doing well). Accenture has a foot in both camps too. But it has outsourcing – which Oracle doesn’t have. As I have said countless times before, outsourcing is merely a switch from inhouse to external spend. Often the total expenditure reduces but this shows as a major revenue gain for the outsourcing sector. Outsourcing always seems to do extra well in times of economic downturn.
I guess that’s why I get a little annoyed when I read headlines like “Oracle results cast shadow over tech sector” (Financial Times 28th Mar 08) Results from tech companies will for ever more be ‘mixed’. But there will be many companies that thrive as a direct consequence of the current economic environment – Autonomy, Accenture and Capita among them.
SITS companies “dropping like flies”
As I reported on Friday Civica is the latest UK SITS company to delist in a £190m MBO.
On 28th Mar 08, the FT reported Paul Lewington of Close Brothers saying that UK SITS players were “dropping like flies” as 15% of the UK’s quoted SITS companies have delisted in the last year.
In the last 12 months, we have lost many of the mid caps like Xansa, iSoft, Northgate, ICM, Surfcontrol, IX Europe and Torex as well as a host of smaller players. Indeed, in the first three months of 2008 we have ‘lost’ Civica, Chelford, CODA, Computerland, Northgate, NSB Retail and Vega. On top of that Clinphone, Flomerics and Netstore are subject to current bid ‘negotiations’. SITS companies valued at c£2.25b have been taken off the market with one-in-three being ‘public to private’ PE backed deals rather than the more normal trade buys. It is telling to note that Telecity is the only SITS IPO in the last 12 months.
On the one hard, the trend is hardly new. I’ve reported a nett decrease in the number of UK quoted SITS companies every year since 2000. I’ve also made it clear that the mid-sized players are basically ‘doomed’ in what is overall a ‘nil growth’ sector. Get Big, Get Niche or Get Out is unfortunately truer today than it ever has been. But, and I’ll check my records on this, I don’t think I have ever seen such a large negative nett figure.
What is really depressing is that I don’t think the funds realised by these SITS sales are being recycled back into the SITS sector.
Who next?
In our M&A in 2008 article on New Years Day, Detica, Civica, Coda, Axon, Innovation, Anite and Dicom were listed as the SITS mid caps which could fall in 2008.
So here we are after just three months and we have already lost Coda and Civica from the list! I, for one, wouldn’t put a bet on any of the remainder lasting the year as a quoted company (although the odds are probably against all of them disappearing!)
Friday, 28 March 2008
Civica in £190m MBO
Civica has agreed a buy-out by management, backed by 3i, worth 270p per share in cash (a premium of 34% on yesterday’s close) or £190m in total. Rumours of this had been swirling around for months - involving other 'trade' purchasers and Alchemy (Civica's original PE backers).
Cornwall Bidco, the bid vehicle, will be controlled by 3i, together with the management team and the executives who will own a minority shareholding. Simon Dowling will continue as CEO.
For the twelve months to 30 September 2007, Civica reported revenue of £126.9m, up 1% on the £125m it made in 2006. Operating profit before goodwill amortisation, exceptional items and LTIP charges, was up 16% to £21.6m. This slowed revenue growth was due to across-the-board difficulties in the local government marketplace - which is affecting others too.
Civica was a spin out after the 'old' Sanderson was acquired by Alchemy in 2000. Civica IPOed in March 2004 at 175p valuing the company at £79m. Not too bad a return for 4 years I guess. The timing is also interesting. The Civica deal will put the spotlight on Anite which has been trying to sell its local government operations for some time - but with no success.
Footnote
I wonder how much the CGT deadline affected the timing for Civica's management team?
Totally unrelated, I also note this morning that Aveva's CEO Richard Longdon, purchased 280,000 ordinary shares at a price of 1058p. Longdon sold his holding of 500,000 shares on 19th Feb citing the new CGT legislation as the reason. so he's waited the required 30 days before repurchasing part of the holding. Longdon's shareholding is now 316,000 ordinary shares and in addition he retains options over 135,376 shares
Oracle sees sales slippage
Oracle announced Q3 results which, although showing a 21% rise in revenues to $4.2b, were none the less below expectations. Oracle stock fell 10% as it admitted that deals had slipped out of Q3. This makes Q4 - which is usually ‘frenetic’ for Oracle – even more demanding.
RM, Netstore and Portrait
A few news items from the last few days that readers might find interesting:
RM issued a warning that H1 results to 31st Mar 08 would be below expectations but expects full year resulus to be ‘in line’. RM said that its results would be more H2 weighted than normal due to higher BSF bid costs in H1 and slewed educational revenues.
Netstore is still in bid talks after it produced results restated due to revenue recognisition and cost accrual problems.
Portrait has acquired the rather strangely named Million Handshakes for £2.8m. MH provides campaign management software and had revenues of £2.8m and PBT of £200k in 2007. Some observers thought that taking on 21 staff in Oslo would be a further distraction.
Logica to hire more staff in Philippines
Logica says that it intends to hire up to 1,000 staff in the Philippines where it says there is a big opportunity for SAP skills. It has 220 staff there now; up from zero a couple of years back. Logica adds that “The days of going to places with lower costs is over. Now it’s about talent and we go where the talent is”.
See Logica eyes more SAP business from Europe from Inquirer.net in the Philippines.
More IT jobs being created?
George O'Connor from Panmure Gordon reported the following in a recent morning update:
Computer People’s (part of Adecco) job creation index shows that permanent and contract IT roles last month rose 94% from the same time last year, suggesting that the jobs sector has so far escaped the ill-effects of the credit crunch. Of course it could also suggest, and our conversations show some evidence that contractors have been moving into permanent roles concerned about the fragility of the market outlook. According to the agency, which supplies IT workers to the likes of TNS and Ericsson (it warned yesterday citing slowing growth), 581 new IT jobs were created in February 2008, compared to 300 in February 2007. Says Computer People “we have already seen that many businesses are focusing on IT as they endeavour to improve efficiencies in the wake of the credit crunch”.
Monday, 24 March 2008
Tietoenator gets a bid approach from private equity
Finnish IT services company, Tietoenator has received a bid for Euro1.1b from Cidron Services Oy which is indirectly owned by private equity group - Nordic Capital. Given that Tietoenator closed at Euro15.99 – higher than Euro15.50 the Nordic offer – clearly there are expectations of a counter bid. This equates to a PSR of c0.6.
Tietoenator had lost about half of its value in the last year – before the bid boosted its shares by 40%. A profits warning, the departure of its CEO in Oct 07 and its first ever quarterly loss didn’t help.
Cidron Services Oy owned 4.4% of Tieto before the offer. They had bought Tieto's Personec (body-shopping business) at the end of 2006 (€150m of revenues) and merged it with Tradimus (€200m revenues) to create a Nordic IT services and outsourcing business in areas like Finance and Logistics BPO and Payroll processing. They also bought part of Atos' Nordic business (Atos Medical, €35m 2006 revs.) which Atos sold to WM Data. Still swallowing Tieto will be a big investment relative to their others in the IT Services sector.
In some ways this bid is quite encouraging for the sector. Some had expected M&A – particularly PE-backed bids - to suffer in the current economic climate. Interestly, Capgemini and Atos Origin shares both rose on the news - two companies which seem to be the subject of constant M&A rumours. Indeed Centaurus is a hostile bidder at Atos Origin; having amassed a 20% stake. The only really significant PE backed deal in the European IT services sector in the last year was Apax' acquisition of GFI. Interestingly Apax valued GFI at €7 and today the stock trades at €3.5!
Danson and TMN
Knowing the readership of HotViews, I know that quite a few of you will be interested in Mike Danson’s doings now that he has departed Datamonitor (which bought Ovum in Dec 06 and was itself bought by Informa in 2007.
Last week, Danson upped his stake in internet marketing company TMN to 10.5%. He’s been buying at various prices from 45p and is in competition with Tangent who have launched a £30m/50p bid for TMN. TMN is in the course of ‘digesting’ its own merger with Internet Business Group last December.
TMN had revenues of £16.1m and PBT of £3.18m in 2007 – a pretty impressive 20% PBT margin
TMN Chairman is Peter Harkness who was also an NED at Datamonitor. He was appointed to the Datamonitor board when they acquired the Butler Group where Harkness was the Chairman.
Whether Danson has intervened to help get a better price for TMN (some commentators are suggesting a target 70p price) or Danson sees TMN as his vehicle to build a new media empire, is unclear. TMN would not be a bad place for Danson to start again. TMN has three divisions – online marketing (tmn media), agency (edr) and research (the ID factor). Danson, who has netted well in excess of £100m from his Datamonitor holding over the last few years, certainly has the funds to do what he likes with TMN or anyone else.
Wednesday, 19 March 2008
Misys and Allscripts
I rather liked Misys’ plans to ‘merge’ its US healthcare operations with its rival Allscripts which will retain its NASDAQ listing. Basically Misys will take a 54.5% stake for $330m. Misys will continue its UK listing but only for the banking-related bits. See Financial Times 19th March 08 Misys spins out healthcare into Allscripts deal. The deal offers both scale and cost savings (possibly $30m pa in a few years time).
As my (ex-) Ovum Holway colleague Tola Sergeant said “There is a good fit between the two businesses. Misys Healthcare is strong in the US physician (GP) market for practice management systems - about 20% of US physicians use a Misys system. Allscripts, on the other hand, is strong in the clinical applications space with products including an electronic health record and personal health record. Moreover, Misys tends to focus on the lower end of the physician market, while Allscripts' customer base tends to be at the higher end. Bringing the two companies together will enable cross-selling and, in particular, allow Allscripts to target Misys' large footprint with its clinical applications.”
The market initially gave it the thumbs up with the shares up from 140p to nearly 170p but all the gains were reversed today (Wednesday).
It’s now over a year since Mike Lawrie took over from Kevin Lomax after his failed MBO bid. I think he’s done a good job. But this has not been reflected in the Misys share price which has fallen from 199p when he was appointed to 143p today. Lawrie is sharing the pain with shareholders (like me). He bought £500K worth of shares on appointment with a promise of bonus matching shares when the share price reached 225p. A long way to go now.
Sage finds a US CEO at last
Sage has completed its too-long task of finding a CEO for its US operations; which is roughly 50% of its revenues. She’s Sue Swenson and comes from Atrinsic where she was COO. Her main background, however, is from a variety of telecoms companies.
George O’Connor (Panmure Gordon) likened Swenson to Carly Fiorina who came to HP from a similar background and could hardly be described as a success. I’m afraid I am with George on this one. Telecomms people just don’t get SITS. I’ve had a few other emails from analysts equally sceptical about the appointment.
Logica boosts offshore operations
Logica is to open a new facility outside Chennai in India which will eventually have 1,500 staff. They have also poached Abhay Gupte from EDS to be their new CEO in India. GBS Bindra gets the newly created role of Global Innovation Director. Gupte's predecessor as CEO of Logica India, Rahul Patwardhan, becomes Global Director Application Services; based in Europe.
This will ultimately boost Logica’s Indian operations to 4500. Still too small but a speedy step in the right direction. Indeed, I’m quite impressed with this move coming so quickly after Andy Green started as Logica’s new CEO.
Facebook introduces new pricacy settings and Future gazing for social networking
If only Zuckerberg had adopted my original suggestion, it would have been so simple. I could then have coded each of my ‘friends’ accordingly and set up a simple template of settings for each. Everytime a new ‘friend’ arrived I could say “He’s business, she’s family’ etc.
Also the new Facebook proposals do not allow me to have a different profile for my business and social contacts. My LinkedIn (and GLG) profile is quite different to my current Facebook profile. Personally I want one profile with added business and social bits. I’d either like them on the same network or have a centralised profile serving various social and business networks.
Everywhere and Nowhere
The article in today's Economist makes a very interesting point about social networks in general. It points out that 10 years ago Microsoft bought Hotmail but even now nobody has found a way of monetizing web mail services. Today AOL buys Bebo. Nobody has yet found - indeed the article suggests will ever find - a way of monetizing social networking sites. Today Webmail exists as part of your overall 'service' driving traffic to other parts of your site/service. Tomorrow 'social networking' will be viewed in much the same way.
Indeed the article suggests that today's social networking will look quaint in a few years time. Much in the way that I have argued above, you will get status updates, access to your friend's photos, profiles etc. 'in the air' as part of the 'service' you get from your email supplier, ISP or whatever. You will not need to log into Facebook, LinkedIn etc at all.
Sunday, 16 March 2008
NHS IT "considerably underspent"
It is pretty rare – actually probably unprecedented – to report that a Public Sector IT project has actually paid its suppliers considerably less than it had expected. To March 2007, the NHS IT’s main suppliers – CSC, BT, Fujitsu, iSoft and Cerner – had been paid £1.3b whereas the forecast was £2.8m. This just shows how much pain these suppliers must have (indeed some still are) suffering. It also shows how effective (some claim ‘too effective’) the contracts that the much maligned Richard Granger negotiated actually proved to be.
Of course, it’s not quite as ‘good’ as it seems because the main reason for this is that the project is behind schedule – particularly the Care Records Systems. However, some other parts of the project seem already to be producing some rather encouraging savings. The National Network – N3 supplied by BT - had provided savings of £192m between Mar 2004 and Mar 2007 and is estimated to save £95m pa into the future. An estimated £1.14b in savings are expected by 2014.
How the figures released by the Dept of Health will be received will vary on your entrenched position. I’m sure my friend Tony Collins at Computer Weekly will use them as further evidence of a failed Government IT project. Maybe I’m entrenched too because I have long believed that, by 2014 when the current contracts end, the NHS IT project will have been implemented successfully across the country and ‘taken for granted’ by the great British public – in much the same way as the fast and efficient way today you can get a Passport, renew your vehicle licence, calculate your PAYE etc. I use these examples as they were all initially example of IT disasters.
That’s not to say that there haven’t been many mistakes in this project. Indeed I have highlighted many of them over the years! But it is very rare to see any of the benefits of the project ever given any publicity.
I know a lot of HotViews readers are interested in the NHS IT project – indeed some of your jobs depend on it!. So can I commend you read the follows:
eHealth Insider 14th Mar 08 NPfIT spent half total planned in first three years
Financial Times 14th Mar 08 Tough NHS contracts push IT scheme under budget
Computer Weekly 14th Mar 08 NHS IT spends £1.5b less than expected
Financial Times 13th Mar 08 NHS faces test of gauging savings success
Or you could even read the original Department of Health/Connecting for Health Press Release issued on 14th Mar 08 NHS IT programme forecasts better care and billions in savings.
Outsourcing - Boring, Boring, Boring!
I hosted a really pleasant dinner at Mosimanns last week for some pretty important CEOs from the software sector. I thought, as I was paying for the evening, they would be ‘nice to me’. Have none of it!
Basically I was severely criticised for banging on about outsourcing – ITO and BPO and Capita in particular. Unlike the really exciting software sectors that these CEOs represented – and had all made multimillions from – outsourcing was truly boring...and that’s not in the complimentary way that Holway normally uses the word!
Of course, they were right. Even I cannot get excited about the detail of an insurance back office outsourcing deal anymore. I can however get distinctly excited about the share price performance of the outsourcers. Capita is still the best performing share in my – or probably anyone else’s – tech portfolio. Up an amazing 174xtimes since their 1989 IPO. That is twice the 82xtimes that the second best performer – Sage – has achieved.
But, as they say, ‘past performance is no guide to the future’. However, in a period when almost every software (indeed every SITS) company has showed massive share price falls (the UK FTSE SCS Index is well over 20% off its 2007 high), the outsourcers have held up very well. Capita, Serco and Xchanging are pretty much where they started 2008 compared with a 12% decline in both the FTSE100 and the FTSE SCS Indices. I can tell you, that’s pretty good!
For further reading see Lex on the UK outsourcers in the Financial Times on 14th Mar 08. It quotes Ovum Holway research too.
Yet more ‘unintended consequences’ in the Budget
Thanks for all the many comments I received about my budget post on ‘unintended consequences’.
Lest I get accused of only being concerned about what happens to rich people (I had rather hoped that my work with the Prince’s Trust might indicated that I had wider interests!) the ‘unintended consequence’ that most appalled me in the Budget was the scrapping of the 10% tax band which means that a large number of people earning less than £16,000 pa actually pay a lot more tax – to the tune of £60 per month in the worst case. £500 a year to such people is a huge proportion of their disposable income.
What really gets me is that we pay for a hugely expensive Treasury where one expects there to be boffins with computer models who can predict to the last penny what any change in fiscal policy will mean. So why in the last six months since Darling took over as Chancellor have there been so many ‘back-of-a-fag-packet’ changes where these ‘unintended consequences’ were not spotted BEFORE the policies were announced?
Another ‘unintended consequence’ of the inept handling of the new CGT regime also surfaced this weekend. HMRC is now so overburdened with requests for Clearance Certificates on business owners selling up before the 5th Apr 08 deadline that it can’t cope! If you don’t get such a certificate, the tax treatment is far from secure. See The Times 14th Mar 08 HMRC backlog agitates owners eager to sell before rise in CGT
Bill Thomas and EDS
Interesting interview with Bill Thomas, who heads EDS in EMEA, in today’s Sunday Times. IT forces change on Whitehall.
Bill makes a point that many others have made in the past few years. Government IT policy today is NOT about ‘buying computers’, it is about “accelerating or implementing policy or improving efficiency”. Although that sounds obvious, it was not always so. I heard this story in the context of the Congestion Charge. The first contract awarded to Capita in the 1990s was all about delivering a system of a particular technical spec and it performing to an SLA. The new contract is more about reducing congestion and pollution.
I have long contended that IT companies should get at least part of their ‘reward’ from the benefits the systems they install deliver for the user – be that in the public sector or in the private sector. Indeed, why not a ‘profit share’ between the vendor and purchaser? It is still relatively rare for contracts to be awarded on that basis.
I had an excellent one-to-one dinner with Bill a few weeks back. He celebrates 25 years with EDS this year. Readers will remember that he predates EDS’ takeover of SD-Scicon. Bill is certainly a member of the “Holway Hall of Fame” – a short list of British people who have come up through the ranks to make a major effect on the global SITS scene. Maybe I’ll publish the list someday!
Friday, 14 March 2008
Chancellor drives tech away from UK
The "unintended consequences" arising from the policies of our new inept Chancellor seem to be mounting by the day. Today the FT reports that Yahoo is set to move its European HQ from London to Geneva "for corporate tax reasons".
In addition the FT notes that "Google which has large commercial operations in London, recently chose to base its European engineering headquarters in Zurich and in 2006 Electronic Arts, the games publisher, moved its European headquarters from outside London to Geneva."
I find all this desperately depressing. As Silicon Valley and Seattle have shown, the 'Cluster effect' in tech is crucial. To a lesser extent this has worked in Cambridge in the UK too. UK HQed companies drive local research, inspire local universities, use local suppliers, float on UK stock exchanges using UK legal, financial, M&A and PR advisers. We have a dwindling band of such UK HQed tech companies. So what we had tried to create was the UK being the "Best place in Europe" for US, Japanese, Indian, Chinese etal companies to HQ their European operations outside of their home country. We had been doing pretty well at that game and we have ALL gained substantially as a result. Now our current Chancellor seems hell-bent on showing these very welcome visitors the door. The Welcome Mat has been abruptly removed.
Every aspect of the tech sector in the UK will pay dearly for these hugely shortsighted policies.
New NEDs at BT
I note that Sir Michael Rake has appointed two new NEDs to the board of BT - Patricia Hewitt and Eric Daniels (CEO of Lloydstsb). See BT connects with the halls of power in the FT today. The two IT professionals on the board - Carl Symon (IBM) and Clay Brendish (ex-Admiral) are "facing a review under BT's six-year term policy".
Given my publicly stated views on Patricia Hewitt (a matter of record on HotViews!) it is difficult for me to offer my wholehearted support for her appointment...
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!
Time Warner/AOL buys Bebo for $850m cash
It has just been announced that the AOL division of Time Warner is to buy the social networking site Bebo for $850m cash. Bebo is the third most visited social networking site - after Facebook and Myspace. It is also the most visited site for teenagers in the UK. The last major purchase in this space was News Corp buying Myspace in 2005 for $580m. This was initially thought of as being an extremely ‘rich’ price but has since been referred to a real steal! Last year Microsoft bought a very minor 1.5% stake in FaceBook which technically valued them at $15bThere are a few interesting points here;
1 - Is a 100 strong company worth $850m?
2 - This valuation makes a $15b valuation of Facebook look faintly farcical
3 – Time Warner made a real pig's dinner of their AOL acquisition – at least in part due to a clash of cultures. Bebo looks to be on a different planet to Time Warner
4 – Where does this put the Microsoft/Yahoo deal? I only say that because Yahoo doesn’t give Microsoft a leg up in social networking.
Having said that, if AOL can make the integration work, it looks a very good deal. eMarketeer reckons social networking advertising will be worth $4.1b by 2011. It is certainly a major alternative to email for many – in particular the ‘younger generation’. AOL see online advertising as a key part of their strategy having moved from subscription to an advertising.
Anyway, well done to British-born Michael Birch and his partner Xochi who founded Bebo in 2005 who are £295m richer today. Also Joanna Shields (currently President of Bebo) - The KateModern of Bebo fame - who has been a UK resident for the last 7 years, who is staying on to run Bebo at AOL.
Wednesday, 12 March 2008
Waning appeal of Aim
Very interesting article in today's FT - Aim loses crown as favoured tech funding source. I commend you to read it in full.
Basically the report quoted an E&Y survey showing that there were just 14 tech AIM IPOs in 2007 compared with 24 in 2006. Conversely a study by the University of Hertfordshire and MIT showed that venture capital funding is "thriving" with "the total VC money put into the tech sector (£1b) was twice the amount raised through AIM (£540m)". Given that AIM investors would have lost 11% if they had participated in all the AIM tech IPO s and 44% in all secondary AIM fundraisings, you can understand the waning appetite!
All of the input and comments coming my way - including the conversation at an excellent private dinner I hosted last night at Mosimanns - supports that view. VCs have plenty of cash and see the current market value correction as a great buying opportunity. This particularly applies at the "small to middling" end. Not quite so much appetite at the £1b+ level - having said that there are not that many UK candidates at that level anyway!
Tax changes have made AIM much less attractive for investors. On top of that AIM illiquidity leads to very volatile share prices. (A recent share sale of mine of just 5000 shares caused the share price of the company in question to slump 5%) Who needs that?
"Bullish" BT Global Services
Full page article on Francois Barrault and BT Global Services in the FT today - Barrault highlights Global value to BT. Also a mini profile of the 'Insider is outside contender'.
As I am an adviser to BT Global Services I had better be very careful in my comments. Barrault certainly paints a very 'bullish revenue outlook' for the division with an "assertion that economic downturn will boost the BT GS order book".
For those that constantly speculate on BT GS' M&A ambitions, the FT says "BT Global Services' revenue performance has been fuelled by 28 acquisitions, worth £1.5bn, over the past three years, and Mr Barrault said more deals were likely, notably in IT services. He played down the possibility of large deals, but said BT might be interested in buying parts of a large telecoms or IT group. He suggested other companies could purchase the remaining parts".
On the subject of whether he might be a contender for Ben Verwaayen's CEO job (where Ian Livingston is considered to be the current internal frontrunner) Barrault replied "There is no vacancy right now. I hope Ben will do the job as long as he can."
Tuesday, 11 March 2008
Capita buys Computerland. Why?
Capita has made a recommended 270p/£28.9m offer for Computerland. Computerland is a PC reseller with a managed services operation. It had revenues of £67m in the FYE 30th Apr 07. of which £18.6m is 'contracted'. Of the total, hardware and software resale made up £46m or c70%. Of the remaining £21m, hardware maintence was c£8m, project services c£3m and c£10m 'managed services'.
My (ex-) Ovum Holway colleague, Phil Codling, said "Life is full of surprises, but they rarely come from Capita". This must be the strangest acquisition I have seen from the UK BPO market leader. Paul Pindar sees the acquisition as extending the 'breadth and depth of expertise'; particularly in IT services. I completely agree that having a managed service operation is a pretty good bolt-on for Capita.
Anthony Miller (another ex-colleague) from Arete commented to me "Remember, Richard, they already use them for half their desktop procurement and saw the chance to make it 100pct. I was confused too at first but it does make sense so long as they can fix the margins. But it's very small revs compared to Capita anyway."
I too am not so sure about the low-margin majority reseller business bit. Maybe they will dispose of that bit? But, there again, Capita has hardly bought Computerland at a bargain basement price. Computacenter has a current market value of just £289m but revenues of c£2.3b equating to a PSR of 0.12. Capita is valuing the whole of Computerland at a PSR of 0.43. Put another way, if Computerland's reseller and maintenance business was worth 0.12 * £56m, that means the £10m managed service business would have to be worth £22m. Which is plainly ridiculous!
It is interesting how many AIM IT companies are being sold just before the new CGT regime comes into play. Ch and CEO, Graham Gilbert, owned 3.8m shares worth c£10m which, as he was the founder, probably cost 'nothing' (other than several decades of hard work, agnst etc.) By selling before 5th Apr 08, Gilbert has probably saved himself c£800,000 in tax. And I don't blame him for taking that 'once in a lifetime' opportunity. But it just adds to the 'unintended consequences' that Darling has let lose. Shame on him.
Footnote: Everytime I describe Capita as a tech or IT services company, either Rod, or now Paul, protest. "Capita is a business services company - don't want to be grouped in with companies like Misys".
I have to say, Paul, if you buy companies like Computerland this complaint is starting to look a bit thin!
Chelford sold because of CGT changes?
Last week it was announced that AIM-listed Chelford had agreed to be acquired by Solarsoft for £16.1m cash/215p per share and a 25% premium to the previous day’s closing price.
Chelford, provides specialist solutions in the areas of supply chain management, ERP, manufacturing, warehousing and distribution, asset tracking and financials, using products based upon its own intellectual property, SAP, Microsoft and CODA software products. As at 30 June 2007, Chelford employed in excess of 150 people and generated revenues of approximately £9.3 million and operating profit (before amortisation of intangibles and share based payments) of some £0.6 million in the six month period ended 30 June 2007.
George O’Connor from Panmure Gordon thinks “that this could be the first illustration that CGT tax changes are changing the shape of the sector”.
As readers know, the rate of CGT payable on the sale of business assets (all AIM stocks are classed as business assets) will rise from 10% (assuming the shares have been held for 2 years or more) to 18% in the next Tax Year which starts on 6th Apr 08.
I’ve expressed my views on this crazy CGT change many, many times since Darling wrote it on the back-of-a-fag packet for the pre-Budget review last Oct. Unfortunately I now cannot see him either changing the proposed rules any further or postponing them in his Budget on Wednesday. He has made some concessions – you can still make a £1m gain and be taxed at just 10%. But this will not apply to most AIM shares and it certainly will not apply to most investments that ‘serial entrepreneurs’ (like me) might make. To be eligible you have to be a director of the company and own more than 5% of the voting equity.
In my lifetime, I’ve lived through a number of ‘bad Chancellors’ but Darling is doing everything necessary to get my vote of Worst ever. I just hope he might be one of the shortest stay Chancellors on record too.
The non-non-executive chairman
The papers today are full of the news that Sir Stuart Rose is to become Executive Chairman at Marks & Spencer. This breaks at least two parts of the ‘good governance’ code. Firstly, CEOs should not be elevated to Chairman and secondly that the roles of Chairman and CEO should not be combined. Indeed the ‘model code’ strongly favours a Non-exec Chairman. Although this might look like a non-tech issue, there are plenty of tech companies where this issue is equally contentious.
I’ve sat on around 20 boards in the last 20 years – a mixture of private and publicly quoted companies. I think I can therefore talk with some experience.
1 – In private companies I actually favour a strong Executive Chairman or a combined ‘Chairman and CEO’. It can make for decisive leadership. It works because the person concerned is almost always the most significant shareholder and therefore aligns with the key objective of any Chairman (indeed any director) to work in the best interests of the shareholders. Additionally I think any private company should have at least one NED. At the very least, it’s the cheapest form of consultancy you can buy.
2 – Once the company goes public, however, it is extremely unlikely that any Chairman will have a particularly significant stake. In a public company, I believe very strongly – and from some bitter experience – that there should be a non exec Chairman and a strong CEO.
Many of the problem companies in our sector have been caused because of combining the roles. This can apply to the very smallest companies like Total Systems (why they are still quoted is beyond me) to the largest where the eventual problems at Misys were created (or at least compounded) by Kevin Lomax combining the two roles.
A good Chairman should be just that. There is an art to ‘chairing’ – both at board meetings and outside. It requires an ability to allow people to have their say and not be railroaded by one strong individual. It also requires debate to be focussed and decisive. The combination of a strong CEO and an equally strong non exec Chairman, acting as a mentor to the CEO, is unbeatable. It stops bully tactics. It also provides all the right checks and balances to avoid excesses (in pay and bonuses for example) and avoiding the temptation of dodgy accounting.
See The resistible rise of the non-non-executive chairman in Lombard in the FT today.
Vodafone dinner pictures
I've added some pictures to yesterday's post on the Prince's Trust Technology Leadership Group dinner at Vodafone's HQ last week. Indeed, as many of you were there on the night, you can view the complete set - which will undoubtedly include a picture of YOU, - on http://www.flickr.com/photos/techleadersgroup/
Monday, 10 March 2008
Size really does matter#2
“After organic growth, it seems that size really does matter. The chart [I've posted it again above] from M&A specialists Regent (where I serve as a NED) analyses European tech. acquisitions in 2007. Whether you choose P/E or PSR as your choosen metric, the analysis really does show that size matters! The chart shows that a company with revenues of less than $1m might be valued with a PSR of around 0.5 whereas a company with revenues >$1b might be worth upto 3.5x revenues. In other words almost seven times more! Pretty similar metrics applies to P/Es”.
In Panmure Gordon’s morning note on 10th Mar 08, George O’Connor came to similar conclusions for quoted UK SITS companies. As you can see in the table below, companies with market values less than £100m had average P/Es of just 9.2; compared to 15 for those valued between £100m and £500m and 18.6 for the ‘Elites’ valued at more than £500m.
The other point that George makes is how badly the smaller companies’ share prices have performed – 31% worse than the FTSE All Share compared with ‘just’ 13.7% worse for the mid-sized companies and pretty much ‘par’ for the big boys.
Being ‘small to middling’ is an increasingly uncomfortable place to be. You can still get away with it if you are ‘niche’ – as one of the big boys will ultimately buy you for that specialisation. But if you are ‘general’ you can expect the bad times to get worse.
Sunday, 9 March 2008
Recession starts to bite
If Warren Buffet thinks that the US is in a recession already, who am I to argue. The evidence seems to mount daily. See Sunday Times – Britain shivers as US hits recession. This is now clearly affecting the US SITS sector.
Last Friday Tata Consultancy Services (TCS) disclosed that two Wall Street banks (believed to be Citibank and Merrill Lynch according to The Times) had cancelled projects due to start this quarter. See TCS feels US pinch (my first link to The Calcutta Telegraph). TCS shares slumped 3.3% on the news to $847 – now some 35% lower than their 2007 high reached in Apr 07.
How the UK SITS sector has behaved in previous recessions
There are probably quite a few HotViews readers who have never been through a recession before. The last one was in 1991 – 17 years ago. So, to be practical, unless you have 25 years IT experience under your belt and are approaching your 50th birthday, you really don’t know what is going to hit you. As you can see from the chart below, UK SITS growth came to a crashing halt in 1991. Indeed, the downturn felt much worse because the 1980s had been non-stop double-digit growth. Huge numbers of IT staff lost their jobs in the downturn. It should also be noted that the recession was presaged by a massive downturn in property prices causing the term ‘negative equity’ to be invented! Quite a few of my friends lost both their jobs/companies and their houses (which had been used as security against company debts) The bad times lasted from 1989 to 1993 – ie it took getting on for four years for the good times to return. The internet/dot.com/Y2K fuelled boom in the later part of the 1990s is well recorded. The post 2000 downturn was NOT caused by recession – far from it.
The chart also shows that there were two other recessions before 1991 - in 1974/75 and 1980/81. In 1974/75, SITS suffered along with the rest of the economy. But in 1980/81, SITS was totally unaffected. This is where ‘Next Big Things’ in technology – the IBM PC was launched in 1981 – meant that the sector bucked the trend. This is always used as the ‘evidence’ that we, in IT, should ignore history. A very short-sighted and dangerous viewpoint!
It would, of course, be good to think that a ‘Next Big Thing’ would ride to the rescue again. Indeed, in certain sectors it will. But this is an age when Disruptive Technologies rule – so some will do very well at the expense of a rather larger number that won’t. In the past, companies thought the way forward was to spend more on tech - now they think it's to spend less. This time, the totally of SITS spend is just bound to be adversely affected along with the economy.
I’ve already said that I believe UK SITS growth is more likely to be zero in real terms (c3% at the headline level) in 2008. I’d now add a prediction that UK SITS growth in 2009 will be negative in real terms.
UK SITS growth compared to GDP - Chart
Sinking feeling
Yet another week of pretty significant share price falls. NASDAQ down 2.6% (16.6% YTD), Teckmark down 2.5% (8.1% YTD), FTSE SCS down 2.4% (11.6% YTD). FTSE Telcom down even more at 5.4% (18.2% YTD) with Fixed Line down 6.1% (19.6% YTD)
Holway’s Tech Portfolio has done even worse – down 18.5% YTD with Apple (2007’s BEST performer) now the worst (down 38.9% YTD) But, as readers may remember, I converted most of my gains into cash last Oct (not quite at the peak but still a VERY wise move as it turned out)
The BEST performer in the Holway Tech Portfolio is Capita (no change YTD) On the other hand, Capita’s CEO, Paul Pindar, always complains to me when I refer to Capita as a tech stock.
I wish I could say I thought we had reached the bottom – but I can’t!
Hedra acquired by Mouchel
Knowing the interests of many HotViews readers, I’m sure you will be interested to learn that Mouchel has acquired Hedra for c£50m. Hedra’s 200 consultants will more than double Mouchel's management consulting business to around 500. Mouchel now has 11,000 employees and revenues of C£450m; most of it from the public sector. Hedra made PBT of c£4m on revenues of £47.5m in 2007; an impressive 27% increase on 2006.
Readers will recall that Hedra acquired BPO specialist HBS from Terra Firma for £46.2m in Aug 07. (see my report at the time – Mouchel Parkman buys HBS for seemingly bargain price) .
My (ex) colleagues from Ovum remarked on the Hedra purchase “Typically known for its capabilities in engineering, facilities and property services, IT-led management consultancy was an area out of (Mouchel’s) domain expertise. However, with HBS and Hedra now under its belt, the company is now on the way to becoming one of the one-stop-shop service providers to the public sector, along the lines of Serco and Capita”.
In other words, for all ITO/BPO players in the UK public sector space ”Watch out, there’s a new serious competitor about”.
Holway’s ultimate Martini Moment gets closer as iPlayer launches on the iPhone
Clearly Holway’s ultimate Martini Moment is getting closer and closer. You may remember that the original target was the ability to listen to The Archers “anytime, anywhere and on any device”. I’ve been there and done that. Now the aim is to watch to Coronation Street “anytime, anywhere and on any device”. Making iPlayer available on the iPhone brings that much closer – but you’ll only be able to do it whilst in WiFi range.
I was talking to Steve Posey – Global CTO @ Vodafone - last week and he believes that it will be maybe only two years until I could do that via a mobile network anywhere in the world. Certainly the LTE network Pusey announced – See Vodafone heralds handset that roams the world – should be up to the iPlayer task. But not until 2010 at the earliest.
Connecting with the young and Raising c £40K for the Prince’s Trust
On Thursday Vodafone hosted a Prince’s Trust Technology Leadership Group (I’m the Chairman at the moment) dinner in the Pavilion at their HQ in Newbury. You may remember that this had been flooded last July and this was the first time it had been used since the completion of the refurbishment. It’s magnificent. This time we sold tables to companies and it was sell-out almost immediately with tables hosted by the likes of Oracle, KPMG, Ernst & Young, Detica, EDS, Alcatel-Lucent, Nortel, Nokia, Ericson, EMC, IBM, Sun Microsystems etc. We raised nearly £40K in the evening – amazing and a BIG THANKYOU to everyone involved.
A young lady called Michelle McGawley (pictured with Nick Read (Vodafone UK CEO) and Steve Pusey (Vodafone CTO) in the picture to the right) told us of her experiences on the Prince’s Trust Team programme – a 12-week personal development course, offering work experience, qualific
ations, practical skills, community projects and a residential week to unemployed 16-24 year olds. I tell you, Michelle will not remain unemployed for long if her performance and confidence is anything to go by. It really is inspirational to see the effects that our fundraising can have on young people who had previously been given up as a bad job.
Both Nick Read (Vodafone’s UK MD) and Steve Pusey (Vodafone’s Global CTO) spoke. They both concentrated on youth. Pusey made the point that the majority of their users now – and obviously much more in the future – were young but the services were designed by much older people – dare I say it like the people in the audience. Pusey used the example of his 6-year old daughter and the Penguin Club - a kind of junior version of Facebook for the uninitiated. (If you don’t know what Facebook is – I give up!)
I think this generation gap between the under 24 year olds and the over 40s is wider than at any time in the last 40 years. It reminds me of the last great generation gap that existed between the newly invented teenagers of the 1950s and 1960s and their pre-war Mums and Dads. Ie that existed between me and my Mum and Dad. That gap did not exist with my own kids. But my own kids (now in their mid 30s) seem to have as wide a gap with the Youtube/Facebook/Instant Messaging generation.
Anyway engaging with the sub 24 year olds is what the Prince’s Trust is all about and, as Vodafone recognises, is pretty crucial for all businesses wanting to stay ahead of (or even in) the game.
How technology is changing our behaviour
Nielson Online issued research last week showing that Youtube was now the most visited social media website in the UK with 10.4m visitors in Jan. This compares with Wikipedia (9.6m) and Facebook (8.5m) See FT 6th Mar 08 Online video watching surges. I have to admit that I often sit down to watch Youtube on my 50inch plasma driven by my iMac. Last night I played most of Amy MacDonald’s album that way. Of course, this change in behaviour is having a pretty major effect on conventional TV – and the advertising revenue on which it relies. One only has to look at the appalling results from ITV last week for evidence.
But one of the more interesting effects of this was revealed by the Sleep Council which found 16% of all couples now sleep in separate beds. The main reason (apparently) is that our bedrooms are where all the technology resides. So when one partner wants to watch Youtube or check into Facebook on the bedroom PC, the other wants to sleep – so goes into a separate room. I must admit my own wife has banned my Blackberry from our bedroom. One of my friends tried to circumvent this problem by checking his Blackberry in the bathroom each morning. Until his wife made a doctor’s appointment for him suspecting he might have a rather more serious ailment.
Facebook losing its appeal
On 21st Feb 08 I reported that Facebook had seen a 5% decline in users between Dec 07 and Jan 08 – its first ever monthly decline, spurred me into analysing my own use.
I still check into Facebook once a day and usually update my status when I do. I have 115 friends – although I haven’t made any new friends in the last month. Only 4% of my friends update their status everyday (the 3 twitterers update multiple times per day!). Indeed only 13% update their status one or more times a week. The vast majority do not use that feature at all.
I went through all my friends and found 25% of them had no activity on their Profile page at all in the last month. Of course, I could have put that more positively by saying that 75% of my friends are clearly using Facebook regularly!
There seems to be a huge increase in the number of social/business networking sites. It seems like dozens of new ones in niche areas get launched everyday. For example headhunters, Heidricks & Struggles are about to launch an exclusive site for its ‘elite managers” – A Facebook for the seven-figure set – as Businessweek described it . “It will focus on CEOs, COOs, CFOs, and the marketing and tech chiefs who work by their sides. And it will be private—just for Heidrick clients and candidates”. On 27th Feb I commented on FT’s plans to launch a social networking site for TMT executives.
Do executives really want to belong to dozens of different networks?
Will they be willing to create profiles for each?
Will they login to them regularly?
A HotViews reader told me last week how the only messages he had received from one of the new networks he had joined were from other members trying to get him to join their newly created niche networks!
The answer (for me anyway) is to belong to one network which allows access to many mini/niche networks depending on my interests. If Mark Zuckerberg had taken note of my letter, “It could have been Facebook”.
Tuesday, 4 March 2008
Axon exceeds expectations
When Mark Hunter’s departure from Axon – which had been long trailed – was finally announced Oct 07, the share price went into a tail-spin. Indeed it halved over a three month period. Mark is an old friend (not sure if I can really apply the term ‘old’ to a youngster like Mark though!) When I went to lunch with him in January he told me that he knew of no trading reason for the share price fall – indeed he expected Axon not only to meet expectations but probably “marginally exceed them as we always do”.
The share price had by then fallen to 450p
Today Axon has announced its results for the year to 31st Dec 07 and everything Mark said came to pass. Indeed, these were a pretty excellent set of results. How many readers would not be pretty pleased to report:
- Revenues up 49% at £204.5m
- Operating profit up 69% at £30.6m
- PBT up 67% at £29.5m
- Diluted EPS up 56% at 31.7p
ChairmanRoy Merritt, paid tribute to Mark and thanked him “for leaving Axon in such good shape”.
Steve Cardell has been CEO since Mar 07 – ie much of the period in question. Steve has been responsible for building Axon’s US operations ‘from scratch”. If you remember Mark told me that he had visited the US only three times in the last two years. Axon’s US operations have more than doubled from £32m to £74m and now represent 36% of total revenues (2006 = 23%) Although half of this growth is due to the two US acquisitions Axon made in 2007, organic growth in the US was 41% or 52% in constant currency. Now that is pretty exceptional for a UK company!
But Axon is now setting its sights on being a global player. Asia Pac revenues also grew c50% to £10.8m. They acquired JSPC, a Malaysian SAP service provider in Oct 2007.
Nearer to home, Axon points out that, although it is “the dominant player” in the UK SAP market, the European SAP market is six-times larger and SAP is pretty unrepresented. Clearly some ‘corporate activity’ planned there.
The outlook also looks good. Indeed they join the long list of companies that tell me that although they recognise the “increased macroeconomic uncertainties, we have yet to see any consequence of this in our own orderbook and pipeline”.
So how was Axon rewarded for these exceptional results?
You guessed it. Currently (9.00am) share price down 63p/11% at 499p. Perhaps someone can tell me why?
Monday, 3 March 2008
Access to your medical records
As anyone listening to the Radio 4 Today programme this morning will know, Tony Collins at Computer Weekly has discovered, in a document obtained under the Freedom of Information Act, that patient records from the new NHS IT Database can be viewed by ‘non-qualified NHS staff.
In my earlier “I think there is a world market for maybe five computers” I made the point that, although I could see huge advantages to ‘Cloud Computing’ it was the security/confidentially issues that worried me most. Indeed I used access to my NHS medical records as an example. I’ve often asked my friends "If offered the choice of which set of records they would least like to see in the public domain – tax, employment, financial or medical?" They all always opt for the complete secrecy of their medical records. Our medical records can contain huge amounts of information which might be embarrassing at best - or downright dangerous at worse - if they came into the wrong hands. The wrong hands here are, for example, your employer concerned about your likely health record (or your drinking or drug taking), an insurance company concerned if you have taken an HIV test, a partner looking for previous STDs or the US Immigration Services looking for…anything!
There are 800,000 people working for the NHS. It now looks as if (as I feared) any receptionist can now look up the database. I’m sure that most will only use it for the purpose intended. But how easy to access a neighbour, workmate, new boyfriend or ex-husband? That’s one step away from doing it for someone else. I remember when the DVLA database was setup we were all assured that access could only be made by the Police. There were lots of Police too and it became pretty simple to get any driver details you needed. Now, of course, its legit with insurance companies etc all having access to these details.
Even if access is restricted, CDs still get ‘lost’…
As you can see, I’ve changed my views about large centralised databases. Maybe I’m becoming a Luddite too.
IT is officially a Bear
A Bear Market is officially defined as the point where it drops 20% or more from its previous high. On Friday that is exactly what happened for the NASDAQ. It closed at its high of 2859 on 31st Oct but closed at 2271 on Friday night. Simultaneously, the FTSE UK SCS Index – of probably the most relevance to HotViews readers – was also declared an Official Bear. It hit a high of 628 in early Nov 07 but closed Friday on 494. Interestingly the Techmark100 is still quite a way from Bear Territory – it hit 1748 last Oct but is currently ‘only’ off 11% from its high.
As you can see from the table below, February was just a continuation of the downward spiral – albeit not quite as steep as in January. Hardware was the worst performer – off 15% in Feb and 24% YTD.
Support Services, however, was up 1.6% in Feb. This, you will recall, is the sector which covers the business support players like Capita and Xchanging as well as many of the ITSAs. In my opinion, the BPO players will be the safest haven in this storm. This prediction has certainly proved correct so far.
I wish I could say that the worst is over – but I can’t.
Note - For a more detailed analysis of the performance of individual UK SCS shares see http://www.megabuyte.com/
