A week of management buyouts

The re-organisation plan for Marconi and the indictments of former WorldCom executives dominated the international world of IT and telecommunications last week.

The revised and lower offer in the MB Technologies MBO scenario doesn`t seem to have any parallel historically.

Paul Booth, MD, Global Research Partners

At home, the Comparex, MB Technologies news and the 'activities` of M-Cell and Vodacom elsewhere in Africa accounted for much of the local ICT headline space.

• we saw very good annual numbers from Mustek (revenues up and net profit significantly up);
• year-end losses from I-Fusion, part of the Bidvest Group (revenues also down) and OneLogix Group (although revenue well up);
• good interim figures from Square One (revenue up and back in the black);
• the temporary suspension of MB Technologies` shares, ahead of a proposed and revised management buy-out (MBO) offer; and
• a profit warning from Global Technology.

[Local]

Other local news included:

• the announcement by Nedcor that it intends to sell its 8% stake in Dimension Data "as soon as the price is right";
• the resignation of Ken Jarvis, MD of Idion Solutions;
• the appointments of Garry Hodgson as digital divide and community affairs regional director manager for Microsoft Middle East, Michael Purves as CEO of CCI Holdings and Africa, and Cliff van Tonder as Front Capital Systems regional manager for Africa and Middle East;
• the closure of many of the smaller entities within OneLogix Group, thus removing all its technology components;
• the freezing of Vodacom`s plans to operate in Zambia;
• the financial concerns re M-Cell`s operations in Nigeria; and
• the proposal that Venfin, already a major shareholder in Vodacom, acquires the 5% stake in Vodacom currently held by Hosken Consolidated Investments.
• Additionally, Comparex announced an MBO for its European operations and that it would seek an empowerment partner for its remaining African activities. As a direct consequence, CEO, Rian du Plessis, has been relieved of his duties, and replaced by Peter Watt, as the acting CEO. Furthermore, the MB Technologies MBO deal has been revised downwards to an offer of 110c per share instead of the 140c per share originally proposed.

The revised and lower offer in the MB Technologies MBO scenario doesn`t seem to have any parallel historically and could well have stirred up a hornet`s nest among the company`s minority shareholders. The justification that I heard for this unprecedented action was extremely tenuous, to say the least!

• we saw the name changes of Caldera to the SCO Group and Multinet International to Showintel Networks;
• the announcement that WorldCom`s former top finance executive, Scott Sullivan, had been indicted by a federal grand jury on various charges along with other accounting executives;
• the freezing of the assets of Silverline Technologies by a federal judge over a row re its debts; and
• the sell-off by Softbank of part of its stake in Yahoo ($270 million) and UTStarcom ($72 million).

Additionally, look out for the fate of Marconi shareholders following the proposed restructuring plan currently being negotiated that could leave them with as little as 0.5% of the company. Furthermore, the deal will see Marconi Plc liquidated and reborn as Marconi Corp and listed on the London Stock Exchange and Nasdaq.

[International]

Other international news included:

• the appointments of Richard Crandall as chairman of Giga Information Group, Matthew Espe as president and CEO of Ikon Offices Solutions, Alex Mandl as CEO of Gemplus, Nalan Niedzwiecki as president and CEO of Quantum and Stephenie Streeter as president and CEO of Banta;
• the resignation of Robert Weiler, chairman, president and CEO of Giga Information Group;
• the retirement of Doug Spreng, president and COO of Applied Micro Circuits; and
• job loss announcements from M-Wave, MetaSolv, Netro, Nortel Networks, Siemens and TriQuint Semiconductor.

We saw excellent figures from Mobile Telesystems MTS, Neoware and VimpelCom.

Good numbers were recorded by AC Service AG, Catalyst Semiconductor, Hellenic Telecomms Organization SA, Project Telecom, SemTech (back in the black) and SSA Global Technologies; and satisfactory ones by CMG, Methode Electronics, Micros Systems and Telekom Austria (back in the black).

Mediocre returns came from Alliance Atlantis Comms, China Telecom, CyberGuard (back in the black), Formula Systems (back in the black), HCL Technologies, Jenoptik, Microlink Oy (back in the black), Teletouch (back in the black), Telstra, Ultimate Electronics and Via Technologies.

Very poor results were posted by Applied Signal Technology (back in the black).

Losses came from ADB Systems International, Compass Software Group, DataMirror, Eckoh Technologies, Eltek, eOn Comms, GTC Telecom, HP, Industri-Matematik International, InterTAN, Korea Thrunet, Leitch Technology, LTX, Merant, MKS, Mobilcom AG, Morse, MTI Technology, Nuvo Network Management, Peerless Systems, Pumatech, SAMSys Technologies, SBE, SeaChange International, Sopheon, Spirent, Stratos Lightwave, The SCO Group, T-Online International AG, T/R Systems, Tiscali, Trintech, Versant, Versus Technology and Workstream.

Other financial news included share buy-back announcements from Roxio, Siebel Systems and UTStarcom; profit warnings from BellSouth, Kudelski, Liberate Technologies, Mobilcom AG, Nortel Networks, Novellus, Peregrine Systems, SemTech, Sun Microsystems and Ultimate Electronics; and share split announcements from Communitronics of America (reverse) and SPX. Additionally, Peregrine Systems is to restate its results for the first three quarters of 2002 and all of 2000 and 2001.

Locally

AST (+19.1%)
Datatec (-19.1%)
Digicore (+31.3%)
I-Solutions (-27.3%)
Jasco (+20.4%)
Labat Africa (+42.9%)
MB Technologies (-23.1%)
Mustek (+13.9%)
Prism (-37.9%)
Y3K (-50%)

Internationally

American Superconductor (-32.7%)
Corel (+78.7%)
DDi (+81.5%)
Dobson Comms (-36.4%)
eGain (-32.4%)
ePresence (+50.9%)
Focal Comms (-38.9%)
Leap Wireless (-58.5%)
Rainmaker Systems (+33.3%)
Terayon Communication Systems (+44.9%)

I will be in the UK next weekend and thus the next issue of Booth`s Bites will appear on Monday, 16 September.