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2013: What an exciting year!

The demise of a number of ICT companies in the local market is a major cause for concern going forward.

Paul Booth
By Paul Booth
Johannesburg, 09 Dec 2013

There is no doubt that 2013 was a tough but healthy year for the ICT industry, with all of the financial indicators rising significantly; an almost unprecedented level of new start-ups, significant IPO and private equity activity; and a feverish merger/acquisition scene, including the third-largest deal ever transacted. However, the demise and de-listings of ICT companies in the local market is a major cause for concern going forward, despite many more conglomerates now having a significant and growing ICT portfolio.

In the US, the technology-heavy Nasdaq is just over the 4 000-level, almost 35% up from the start of the year, and is the highest it has been for over 13 years, since the dotcom boom of the year 2000. Also, the JSE hit record levels (+/-46 000) in early November, and is, at present, up nearly 15% for the year.

Despite the continuing economic issues, the local ICT industry has seen positive growth during the year and well above GDP growth levels. Also, from recent surveys by at least one of the major research companies, the majority of IT budgets have either increased or stayed at 2012 levels. Nevertheless, the drive for efficiency and productivity still remains a top priority, with the areas of business intelligence/analytics, disaster recovery and business continuity, and governance and security - still very much in the focus of many organisations, especially following the revelations regarding the activities of the NSA as disclosed by Edward Snowden.

From a technology perspective, cloud computing and social media, coupled with the move to mobility and the proliferation of devices and the consequential 'big data' issues arising from this, heads up a long list of opportunities for the foreseeable future, and has been coined: 'The Internet of Everything'. In addition, countries are viewing anti-competitive behaviour by vendors very seriously, and taking the appropriate steps to combat this. For many organisations, the trading and/or protection of patents has become a major and potentially lucrative activity.

Local scene

This year has not been a good one for ICT listed companies, as there have been no new listings but several de-listings/suspensions, specifically Altech, following its acquisition by parent company Altron; Muvoni Technology Group; and Zaptronix. Also, SecureData and Stella Vista are expected to be de-listed early in 2014.

However, on a positive note, there were a number of new direct entrants and new companies launched into the local market, including Agilitude, Cyberoam, FireEye, Gilat, Tech Mahindra (via Falcorp), Nutanix (via MICROmega), Orange Horizons, ServiceNow and Tele Enterprise. Unfortunately, HTC closed its local office.

As usual, there was much merger and acquisition activity that included Altron acquiring Altech (at long last); Datatec making several deals, many of which were in Europe; MB Technologies acquiring GAAP Point of Sale and SecureData, and merging its Platinum Micro and Tarsus operations; MTN taking full control of its Cyprus operation; and Pinnacle making several deals including a 30% stake in Datacentrix.

Also, in its own inimitable way, Naspers continued to invest in various overseas Internet and e-commerce ventures, including an investment in Avito (Russia) and Redbus (India).

Other major events included ConvergeNet Holdings disposing of its Sizwe subsidiary; FoneWorx unable to agree on its deal with the Kirsh family and Caxton stepping in to take the latter's stake; Mix Telematics undertaking a successful IPO on Nasdaq; Net UEPS Technologies being embroiled in a lawsuit with AllPay regarding the SASSA payments contract; Turkcell resurrecting its lawsuit against MTN following its unsuccessful attempt to do so in the US; and Telkom SA launching Telkom Mobile and paying its fines to the Competition Commission for previous anti-competitive behaviour.

Key appointments during the year included a new minister at the Department of Communications, and new country managers/GMs/CEOs/MDs at many companies, including Acer, Ansys, Digicore, Gijima, ICASA, MB Technologies, Mimecast, MTN, Mxit, Nokia, Schneider Electric, SITA, Sitabile Technology Services, Software AG, Tarsus, Telkom SA, VMware and Westcon. Also, Gary Morolo, chairman of Datacentrix, resigned, and unfortunately, Frank Heydenrych, a journalist and previous editor of ComputerWeek, passed away.

From an awards viewpoint, the key 'winners' included Barry Dwolatzky, director of the Joburg Centre for Software Engineering, and Mtelo Nyati, Microsoft SA MD, as the joint IITPSA 2013 IT Personality of the Year; and Sal Laher, CIO at Eskom, as the 2013 Visionary CIO of the year.

African scene

The African scene was again dominated by the telecommunications industry, and in particular, the many new mobile initiatives that have been launched, including the establishment of many new LTE players. Despite the availability and exploitation of the various submarine cables that now serve the continent and the significant amount of fibre that has been laid, the satellite industry has continued to flourish, as many new players have entered the African market, including the first mobile satellite player, Thuraya.

As the African market matures, the emergence of potential regional hubs continues apace, with Kenya emerging as the centre for East Africa and a duel between Ghana and Nigeria for West Africa; while North Africa continues to fall under the Middle East. As previously, there are still no IT companies listed in the current 'Top 500 Companies in Africa' list from outside SA, and still only a handful of telecommunications companies included.

However, ICT activity on the continent continues to thrive, with many new offices being established by companies such as Canon, Drive Control, GSMA, Hitachi Data Systems, IBM, Metrofile and New Leaf Africa, Sage and Vodacom.

Other activities in Africa included the establishment of IBM's first African research lab in Africa and an innovation centre in Nairobi; Altech disposing of its African interests; Bharti Airtel acquiring Warid Telecom Uganda; Dimension Data acquiring AccessKenya; Etisalat buying Vivendi's stake in Maroc Telecom; IBM opening a new development centre in Casablanca; and Korea Telecom opening a services company in Kenya, in a joint venture with that country's government.

In addition, many new regional appointments were made during the year from companies such as Airtel, BlackBerry, Cisco, Ericsson, IBM, Intelsat, NetApp, Nokia, Samsung, SAS, Software AG and Symantec.

International scene

This year has epitomised a healthy, thriving and growing ICT industry with significant consolidations in the services, security, semiconductor, social media and telecommunications markets. In addition, several Chinese companies, such as Alibaba, Baidu, Huawei Technologies, Lenovo, Tencent and ZTE, are now making their mark globally and many new names, especially in the mobile space, are emerging.

Ten of the top ICT companies have each been involved with at least five acquisitions. These companies are Accenture, AT&T, Cisco, Facebook, Google, IBM, Iron Mountain, Microsoft, Oracle and Yahoo; and included AT&T acquiring Leap Wireless ($1.2 billion), MIP Tower Holdings ($4.85 billion), and a tower deal with Crown Castle ($4.85 billion); Cisco buying Sourcefire ($2.7 billion); IBM purchasing SoftLayer Technologies ($2 billion+); Microsoft acquiring Nokia's handset business ($7.2 billion); and Oracle buying Acme Packet ($2.1 billion).

In addition, there were several other significant deals, including America Movil (Carlos Slim) investing in KPN and Telekom Austria, as well as buying Start Wireless; Bain's buyout of BMC Software ($6.9 billion); the $24.4 billion privatisation deal involving Dell; Koch Industries' $7.2 billion purchase of Molex; Liberty Global's purchase of Virgin Media ($16 billion); Nokia buying out Siemens from its joint venture (EUR1.7 billion); Softbank's $21.6 billion purchase of Sprint Nextel, with the latter also buying the remainder of Clearwire's shares it didn't already own ($2.2 billion); Telefonica buying E-Plus (EUR5 billion); Verizon buying out Vodafone's share of its joint venture for $130 billion (the world's third-largest deal); and Vodafone purchasing Kabel Deutschland (EUR7.7 billion).

Other major international activities included the EU and other countries such as Brazil and China taking a strong stance against anti-competitive behaviour regarding companies such as Google; major executive changes at BlackBerry; EMC establishing its new 'Pivotal' entity; HP selling its WebOS to LG Electronics; and a continuing battle regarding patents between Apple and Samsung, which is far from over.

On the negative side, there were a number of companies entering either Chapter 11 or similar situations, including Alvarion (probably now being bought by another Israeli telecommunications company), Atari, Kodak (but has now emerged as a new, slimmer entity), Maxcom, Otelco, PowerWave and Sycamore Networks (liquidated).

However, there was significant IPO activity during the year, which included the listings of numerous companies, including CommScope, Covisint, Intelsat, Kofax, Tableau Software, Twitter and Wix.

Major international appointments included new CEOs at Acer, Alcatel-Lucent, Applied Materials, ARM Holdings, ASML, AVG Technologies, BlackBerry, BT Group, Cable & Wireless Communications, CACI International, Diebold, Groupon, Huawei Technologies, Juniper Networks, Level 3 Communications, Mozilla, Nokia, Polycom, Rogers Communications, Samsung, SAP, TeliaSonera, Toshiba, Websense and Zynga; the retirement of Howard Stringer, chairman and ex-CEO of Sony; and the deaths of Ray Dolby, the inventor and founder of Dolby Labs; Douglas Engelbart, the inventor of the computer mouse; Barnaby Jack, a 'white hat' computer hacker; James Martin, one of the world's greatest computer scientists; Ilya Segalovich, the founder of Yandex; and Aaron Swartz, an Internet activist and computer prodigy.

During the year, Lenovo established itself as the number one PC company worldwide, as well as taking the number three smartphone slot, behind Samsung and Apple. HP and IBM continue to battle over the number one server slot, although HP opened a gap in Q3. Samsung remains the number one ICT company, followed by Apple and NTT.

2014 and beyond?

The international scene next year looks to be another exciting one, with continued consolidations particularly within the telecommunications industry; hectic IPO activity, with perhaps the most significant deals being the listing of Alibaba and maybe Pivotal, the entity created by EMC earlier this year; and continuing private equity action from both a buying and selling perspective. However, the litigation picture may be tempered slightly following the US Bill targeting 'patent trolls'.

On the negative side, there were a number of companies entering either Chapter 11 or similar situations.

Also, don't be surprised at the demise or acquisition of some global names, including BlackBerry, Compuware, Lexmark, Nuance Communications and Unisys; the continued pillage of the Israeli technology sector; and the appointment of a non-ICT person to lead Microsoft.

In Africa, expect further developments regarding the establishments of regional hubs; more offices being opened on the continent by the 'big boys' as well as South African companies; which company will take over Madagascar from a telecommunications perspective; Zain's re-entry into the continent; and the launch by ICANN of the .africa domain.

Locally, the heavy focus will be on the potential rationalisation of the telecommunications sector involving Cell C, Vodacom, Neotel, MTN, Telkom Mobile and possibly Orange; while the new Protection of Personal Information legislation will create some interesting challenges and opportunities. Also, there will be further developments regarding the 'spat' involving John Holdsworth and Reunert; resolution of the SASSA/Net 1/AllPay issue; a possible de-listing of TCS; and further expansion of ICT interests by many of the conglomerates.

In addition, the powers that be need to note that the local telecommunications situation is in need of liberalisation and some new initiatives, as it has significantly fallen behind many of the other countries on the continent, and has charges that are prohibitive and some of the highest globally.

Conclusion

The ICT industry is very much alive and kicking, despite only growing at a moderate rate in 2013. I expect this to improve slightly in 2014, with the local market growing at over 6%, and Africa as a continent at an even higher rate. There are bound to be some surprises, as nothing is sacred in the ICT industry, so don't take anything for granted.

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