Although 2003 was another tough year for the ICT industry, at least the local and overseas markets all started to show some growth, unlike the previous two years that saw the European and USA markets shrink in size. According to several research organisations, the ICT sector will start spending again in 2004.
2003 was dominated by consolidations in a number of the sectors within the international ICT industry, while locally black economic empowerment (BEE) involvement accelerated significantly. Unfortunately, the SA scene was overshadowed by the continuing second national fixed line operator (SNO) saga and the ongoing troubles afflicting some of the smaller locally-listed IT entities.
Although 2003 was another tough year for the ICT industry, at least the local and overseas markets all started to show some growth.
Paul Booth, MD, Global Research Partners
In the USA, the technology-heavy NASDAQ ended this year very close to the '2 000` level, a height only seen for a week or so since 2001, showing that confidence in this sector is certainly starting to return, although we are unlikely to see levels approaching the '3 000` mark for some time. Locally, the overall JSE level is at the same level at it was some 15 months ago and has been pushing the '10 000` mark in recent weeks.
The local scene
As has been the case since 1999, there were very few new listings on the JSE this year and a large number of casualties through a combination of liquidations, consolidations, acquisitions and conventional delistings. However, the key characteristic of 2003 was the move by listed and non-listed organisations alike to embrace the principles of BEE. In addition, the share prices of most local technology stocks have remained at low levels, although there have been some that have manifested significant growth. An analysis at the end of November suggested that of the over 60 technology shares still listed some 21% (19 % in 2002) were trading below 10c, 14.5% were below 50c, and another 16% were under R1. However, 30.5% were trading above R2, up from 25% last year.
Black economic empowerment
On the empowerment front we saw:
Abnoba take a 30% stake in Galdon Data
Business Connexion take a 25.1% stake in Comparex
Gijima Technologies take a 25.1% stake in Prism subsidiary PTSS
J&J Group take a 30% stake in Faritec
Kgorong Investment Holdings take a 25.1% stake in ATC
A management consortium acquire the Enterprise Connection entity within the Connection Group
Matomo take a 30% stake in Altech`s subsidiary Alcom Systems
Safika Holdings take a 25% stake in Mustek as well as a stake in MB Technologies`s StorTech
Tshanduko take a 30% stake in Cirrus TechVue
Jasco purchase of Tasslelane
Uhlelo Investments buy Optiplan
WDB take a 25% stake in Paracon
There was also an empowerment-led MBO of Reed Exhibitions SA to create Exhibitions for Africa, and the formation of Affirmative Technology Services following the merger of CSMG, Z-IT and Hephaistion.
Listings, delistings, demises
The only new listing on the JSE was that of Telkom SA, which also listed successfully on the NYSE and was the best performing global telecommunications share in 2003.
Mustek listed on the Taiwanese exchange. Unfortunately, the attrition list was very long and included Accord Technologies, Core Holdings, Crux Technology, DNA (following the absorption of most of its operations by the Super Group), OSI, Planit, Prada Technologies, Softline (following its acquisition by Sage Plc), Streamworks and UAM.
The shares of CCI Holdings, EC-Hold, and MGX were suspended. On the un-listed front Rubico, Specialised Business Systems and Teraitech all ceased operations and/or went into liquidation.
Mergers and acquisitions
Major local mergers, acquisitions or investment activities included:
The sell-off by Comparex of its European operations
The purchase of a 30% interest by Reunert in CS Holdings
The buy-out of Ianitor International by Beget
The buy-out of Xerox`s 50% share in Xeratech by BTG
The acquisitions of Affinity Logic and Fernridge Consulting (51%) by UCS
The purchase of Atos KPMG Consulting by EOH
The acquisition of Oc'e Printing Systems SA by Bidvest
The purchase of the Computer Products Group of Altech Distribution by Sahara
The buy-out of JMR Software by Motswedi (the first 'reverse` BEE activity)
The disposal/MBO of some of the entities within Global Technology
The 'disposal` of all the many entities within MGX, apart from Metrofile
The breakaway by Forge Ahead from BMI-TechKnowledge
The unbundling by Johnnic Comms of the majority of its shareholding in MTN
New entrants
New South African offices were opened by Asus, GS Telecom, ITXC, PeopleSoft (the ex-JD Edwards operation), Venture Comms and Zycko SA. Microsoft closed its Durban operation.
IT media
On the media front we saw various technology publications owned by Johnnic become supplements within Computing SA, and the withdrawal by the ITP Group of Windows User Magazine Southern Africa (although it may continue independently). Systems Publishers launched a new Electronic Government publication, Innovations was launched by Financial Mail and Platform was brought to market by Naspers.
Other significant events
These included the SNO saga, which continues to drag on following the non-awarding of the tender for the 51% shareholding in the operation earlier this year. At least the licence has now been awarded to the three entities comprising the other 49% shareholders and maybe by early January we will know the decision re the outstanding 51%.
In addition, there were:
Rights issues from AST and Prism Holdings
The approval by the Cabinet of the Telecomms convergence bill
The launch/emergence of African Legend Indigo, Benefit Recovery Services, CommsCo SA, EmpowerLogic, Kizen, M-Five Software, Nambiti NextWave, Phoenix Software, TSS Managed Services, Volition and Waymark Infotech
The opening of a joint development office in Cape Town by UK-listed AFA Software and London Bridge Software
The launch of the DTI`s Savant initiative
The name change of NetActive to CCN Holdings
The disposal by Global Technology of its remaining interests in Temenos AG
The start of a cellular service by Vodacom in Mozambique
The appointment of Choice Technologies as the exclusive technology partner for SA`s 2010 FIFA World Cup bid
The re-emergence of BCS-Net, including the networking business of Siemens Business Services, under the leadership of Ismail Sali-Ameen
The International scene
Internationally, 2003 was marked by consolidations in the business intelligence (BI), ERP, global services and storage marketplaces. We also saw the listings of several technology stocks, including NEC Electronics, a phenomena that was notably absent in both 2001 and 2002.
In the BI market space, Hyperion swallowed Brio Software, and Business Objects took-over Crystal Decisions. Cognos, the market leader, and SAS are still going it alone.
From an ERP perspective, PeopleSoft acquired JD Edwards and established itself as No 2 in the 'ERP` space behind SAP. SSA Global absorbed Baan, EXE Technologies, Ironside Technologies and several other entities to consolidate its No 4 position behind Oracle`s applications business. The back-end of 2003 saw further consolidations in this sector with Scala Business Solutions and Epicor also merging.
When IBM took over PwC Consulting in 2002, it established itself as the leader in the global services market leaving a handful of major players scrambling for the No 2 slot. In this flurry of activity we saw the acquisition of most of SchlumbergerSema by ATOS Origin and Transiciel by CAP Gemini Ernst & Young. HP seems to be aligning itself via a series of strategic partnerships for a possible take-over of CAP Gemini Ernst & Young in 2004.
The storage market saw many consolidations with the major ones being the acquisitions by EMC of Astrium Storage, Documentum and Legato Systems.
Apart from the above, other major acquisitions/mergers included that of Concord EFS by First Data, Loral (many of its assets) by Intelsat, Overture Services by Yahoo!, SuSE Linux by Novell, Titan by Lockheed Martin, the merger of Olivetti and Telecom Italia, and several take-overs by Cisco, HP and IBM.
Other major international events included the UNIX intellectual property battle started by SCO and initially targeted against IBM but now spreading to other vendors, the on-going battle between the European Commission and Microsoft, the withdrawal by Commerce One from the e-marketplace arena, and the dubious achievements by AOL Time Warner in recording the world`s largest ever loss of almost $100 billion and WorldCom in instigating the world`s largest ever write-off.
Among other noteworthy happenings on the international front were the splitting of Palm into two listed entities following its acquisition of Handspring, the row involving the EC over the French government`s 'loan` to Groupe Bull, which has not been repaid; the departure of many ex-Compaq senior executives from HP, the bankruptcy filing by Grundig; and the 'still open` bid by Oracle to acquire PeopleSoft.
The NASDAQ 100 index saw a number of changes with its annual adjustments that saw technology companies such as ADC Telecomms, Brocade Comms Systems, Ciena and LM Ericsson dropping from the index and companies such as ATI Technologies, Lam Research and Level 3 Comms now being included.
And 2004?
I believe that next year will see more and more BEE initiatives emerging, more adoption of the recommendations of the King II commission and other local and international governance requirements, as well as a significant clean up of many of the smaller IT listed stocks that fail to meet the new JSE listing requirements and/or are struggling in the local market. The introduction of broadband capabilities should have a positive effect on personal and small businesses whilst the SNO should create some much needed pricing pressures on Telkom SA.
Furthermore, various 'hangovers` from 2003 should be finalised early in the year including the resolution of the proposed take-over of NamITech by Altech, the investment of Saab in Grintek, and the de-listings of Aplitec, Aqua Online, EC-Hold (probably) and MGX. We should also see stabilisation of the situations at Global Technology, and at Telkom SA as regards Orion Cellular and Telcordia.
On the international front we will not only see some growth in the IT sector but many new listings. However, I believe there will be a continuation of the consolidation trends that stared to manifest themselves this year. If Gartner is to be believed, 50% of IT suppliers worldwide will disappear by the end of 2005.
From a technology perspective, the mobile/wireless explosion will continue, coupled with a strong move to notebooks/tablets from conventional desktop PCs. I believe we will also see a larger role for smart cards and the use of RFID technology during the next few months with web services becoming a major requirement for many companies later in 2004. As far as voice recognition is concerned, I think we are still some way away and I don`t expect any major breakthroughs in 2004.
Conclusion
There is no doubt that 2003 was a difficult year for many companies and individuals, but I do expect 2004 to be significantly better, with increases in growth averaging around the 10% level and organisations realising that they do need to spend in order for them not to suffer from a lack of competitiveness in the years to come.
I believe that spend in 2004 will be more selective and often focused on short-term projects that will quickly yield business benefits. Unfortunately, much of the industry consolidation that is happening may mean users having to spend resources on coping with the implications of these moves. However, there is no shortage of new technologies for companies to examine from a competitiveness viewpoint and I`m sure astute executives will endeavour to take advantage of this situation.
Appointments
Key appointments during the year included:
Stephen Blewett as MD of Autopage Cellular
James Casey as CEO of Elexir
Rodney de Koch as CEO of ICOZA
Paul Dinsmore as CEO of WebTec
Wayne Holborn as GM of Kyocera Mita SA
Adam Jones as MD of NamITech Holdings
John King as CEO of Atos KPMG Consulting
Grattan Kirk as CEO of Connection Group
Andre Kritzinger as CEO of Siemens Business Services
Claas Kuehnemann as MD of SAP SA
Stafford Masie as country manager for Novell SA
Diego Massidda as CEO of Tiscali SA
Connie Molusi as CEO of Johnnic Comms
Jane Mosebi as MD of Forge Ahead BMI-Techknowledge
Becky Mosehle as GM for AT&T Global Network Services SA
Mavuso Msimang as CEO of SITA
Richard Newton as Group CEO of Global Technology
Charles Osburn as CEO of PreWorX
Gavin Padayachee as MD of CSS Tirisano
Kim Reid as CEO of M-Web
Kevin Reynolds as MD of Oracle SA
Louis Seyffert as country manager for Legato Systems
Mark Taylor as CEO of Intervid
Manoj Tripathi as country manager for BenQ
Mthobi Tyamzashe as the corporate affairs group executive at Vodacom
Stewart van Graan as MD of Dell SA
Graeme Victor as MD of Tiscali World Online
Nic Vlok as CEO of Digicore
Peter Watt as CEO of Comparex
Isaac Zowa as MD of ATS
Resignations during 2003 included:
Richard Beytagh as country manager for Novell
Edward du Plessis as MD of Sentech
Peter Flack as chairman and interim CEO of MGX
Toni Fourie as CEO of Connection Group
Sybrand Grobbelaar as MD of Grintek
Derek Hughes as MD of Software Futures
Ray Leonard as CEO of Global Technology
David Meintjes as CEO of UUNet SA
Jeff Mobela as chairman of Casey
Andile Ngcaba as director-general of the Department of Communications
Rob le Sueur as CEO of Intervid
Lazarus Zim as MD of MTN International
Major international appointments included Francesco Caio as CEO of Cable & Wireless, William Esrey as Chairman of Japan Telecom, Gary Forsee as Chairman of Sprint, Michael Jordan as Chairman and CEO of EDS, Henning Kagermann as sole CEO of SAP, Patricia Russo as Chairman of Lucent Technologies and Carl-Henric Svanberg as CEO of Ericsson. Resignations came from Dick Brown as chairman and CEO of EDS, William Esrey as chairman of Sprint, Doug McCracken as CEO of Deloitte Consulting, and Jerome Swartz as chairman of Symbol Technologies.
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