Empowerment deal takes the limelight

MCI`s plan to emerge from bankruptcy and Novell`s acquisition of SuSE Linux dominated the international world of IT and telecommunications last week.

At home, the second national operator (SNO) news and the Comparex Africa/Business Connexion empowerment deal stole most of the local ICT headline space.

* we saw an interim loss from Datatec (although revenue up a little);

* a positive results warning from Spescom;

* the suspension on the JSE of EC-Hold`s shares;

* a loss warning from CCN Holdings; and

* the extension of the buy-back offer from CCN Holdings to minority shareholders.

* Additionally, look out for a possible change of control at EC-Hold.

Other local news included:

* the securing of a $395 million syndicated loan for MTN Nigeria;

* turnover doubled at J-Enterprise, a division of EOH, following its strategic alliance with JD Edwards;

* the completion of the restructuring of Isis Information Systems to become a telecoms-focused company;

* the name change of IQ Business Group`s supply chain division, IQ Commerce as Volition, which will now operate independently from the IQ Business Group with Treacle Venture Partners and the management as its shareholders;

* the appointments of Ashley Regenass as CEO of Synergy Holdings and Manoj Tripathi as South African country manager for BenQ;

* the merger of Comparex Africa and Business Connexion;

* the buy-out from BMI-TechKnowledge of its 49% stake in Forge Ahead; and

* the announcement by the communications minister that the SNO licence had been awarded to an entity that includes the current 49% shareholders and that a 51% shareholder will be made known within eight weeks.

New local distributorships included that of 3Com by Duxbury Networking, Canon`s consumer imaging products by Core Group and Intellect Aero product by Beget Holdings. Additionally, South African-based Grapevine Interactive announced a partnership with UK-based Eckoh Technologies, which intends selling the former`s multi-channel messaging platform.

* we saw the US Bankruptcy Court`s approval of MCI`s plan to emerge from Chapter 11, probably early in 2004;

* the termination of the merger between Aegis Comms and AllServe Systems; and

* the Polish government sold off more than half its stake in TPSA, the telecoms group.

Additionally, look out for the winner of the race to acquire the IT services unit of Germany-based ThyssenKrupp AG, for which Cap Gemini Ernst & Young has become a front-runner.

International acquisitions, mergers, joint ventures etc (see attachment).

Other international news included:

* the appointments of Steve Berkowitz as CEO of Ask Jeeves, Robert Bucher as chairman and CEO of Adept Technology, Van Chu as CEO of Digital Angel, Paul Gigg as president and CEO of Digital Evolution, Ken Llein as CEO of Wind River Systems, Herb Lustig as president and CEO of Invisa (effective 1 January 2004) and Charles Vaughan as interim president and CEO of Pinnacle Systems;

* the resignation of Michael Birck as CEO of Tellabs (stays on as chairman);

* the retirement of Charles Lee as chairman of Verizon Comms (effective 31 December 2003); and

* a job loss announcement from PanAmSat.

Excellent* figures were posted by ACS-Tech80, Advanced Photonix (back in the black), Arel Comms & Software (back in the black), Blue Phoenix Solutions (back in the black), Cedara Software (back in the black), Emergent, Focus Enhancements (back in the black), Golden Telecom, Internet Gold, TransAct Technologies and ViaSat (back in the black).

Very good* results came from Advant-e (back in the black), Ansys, Cincom, CryptoLogic, Innovex (back in the black), InterActive (back in the black), NovAtel (back in the black), Onlinetel, Philippine Long Distance Telephone, Primus Telecomms (back in the black) and SRA.

Good figures* were recorded by Amdocs, CompuDyne, DRS Technologies, Fair Isaac (back in the black), Hutchinson Technology, IXOS Software AG, Landacorp (back in the black), New Zealand Telecom, Nvidia (back in the black), Perceptron, Radware (back in the black), Scitex (back in the black), Singapore Telecomms, StarTek, SurfControl, Telefonica Moviles Group, Thus, TII Network Technologies, TRM, Veramark (back in the black) and Virgin Mobile.

Satisfactory* figures were posted by Baldwin Technology (back in the black), Calian Technology, Charter Comms (back in the black), Cisco, Commonwealth Telephone Enterprises, Digi International (back in the black), Emerson Electric, Entercom Comms, Evolving Systems, GN Store Nord, Keithley Instruments, MediaCom Comms (back in the black), Network Engines (back in the black), Orbit International, Orbotech (back in the black), Qualcomm, Sentry Technology (back in the black), Symbol Technologies, Telecom Italia SpA (back in the black) and Telecom Italia Mobile SpA (back in the black).

The merger of Comparex Africa and Business Connexion raises a number of interesting questions regarding the companies excluded from this deal.

Paul Booth, MD, Global Research Partners

Mediocre* returns came from Allin, Comms Systems, EasyLink Services, GCI, InterVideo, iPIX, Kewill Systems (but back in the black), Key Components, Legend Group, MAI Systems (but back in the black), Morse, NDS Group, New Skies Satellites, Perot Systems, Pixar, RCM Technologies, Telenetics (but back in the black), TeleTech Holdings and WorldGate Comms (but back in the black).

Very poor results* were posted by eNGENUITY, Netopia (but back in the black), Sapiens International and SimpleTech (but back in the black).

Losses* came from ACE*COMM, Activision, AdStar, Airspan Networks, Alamosa Holdings, Alliance Imaging, American Superconductor, APA Optics, Asyst Technologies, Atari, Avanex, Bitstream, Braun Consulting, Caliper Technologies, CanWest Global Comms, Catalyst International, CBD Media, Completel Europe NV, Corvis, Datatrak, deltathree, ECI Telecom, ECTel, Exabyte, Exenia!, FalconStor Software, Globecomm Systems, iBasis, iCAD, I D Systems, Infonet Services, InteliData, Intelligent Systems, Ionics, ITXC, Lantronix, Loudeye, Meta Group, Minorplanet Systems, MSX International, MTS, Netia SA, NetRatings, Network-1, nStor Technologies, Occam Networks, Optical Comms Products, Peco II, PSi Technologies, Rainmaker, Semitool, Speedcom Wireless, TechTeam Global, Telewest, Terra Lycos, Tokyo Electron, Ultradata Systems, Verso Technologies, VIA NET.WORKS, Viewpoint, Viisage Technology, Vitrix, XO Comms, Z-Tel and Zomax.

Other financial news included analyst upgrades for Agere Systems and TeleTech; analyst downgrades for Asyst Technologies and Qualcomm; share offerings from Amkor Technology, China Netcom, Kana, Sierra Wireless and Terayon; a positive results/profit warning from National Semiconductor; negative results/profit warnings (often veiled) from Clinical Computing, Intershop Comms AG, McData, Philips Electronics, PinkRoccade and Ultimate Electronics; share split announcements from Apogee Technology, Stratasys, Tellium (reverse) and Trident Microsystems; a rights issue announcements from NTL; IPO filings from Synnex Information Technologies and data comms services provider TNS; an IPO this week from chip company Tessera; and a planned IPO in London from CES Software. Additionally, Redback Networks filed for Chapter 11 bankruptcy protection for its re-organisation plan.

Locally

Adept Technology (+34.4%)
Cedara Software (+57.4%)
Com21 (-50%)
DDi (+70.4%)
Eagle Broadband (+109.2%)
Globecomm Systems (+43.9%)
Intershop Comms (+39.4%)
Mitek Systems (+92.9%)
RF Monolithics (+44.4%)
SEMX (-42.9%)

Internationally

Aplitec (-15.4%)
AST (-25.4%)
Cycad (-33.3%)
CS Holdings (+14%)
Maxtec (+200%)
Pinnacle (+32.3%)
Prism (+19.4%)
Spescom (+17.6%)
UCS (+14.9%)
Zaptronix (-25%)

In terms of indices, Nasdaq was up 2% and the JSE up 1.7% for the week.

The merger of Comparex Africa and Business Connexion raises a number of interesting questions regarding the companies excluded from this deal.

Previously, Mosaic was excluded from the Comparex Europe buy-out and again has been 'sidelined`; is there a management buyout (MBO) on the horizon? Comparex recently diluted its shareholding in Perago, so are we likely to see a change of ownership here as well?

Nanoteq and Digital Healthcare Solutions were also excluded from the deal, although Comparex only has a 40% share in the latter. I wouldn`t be surprised to see both of these entities being sold-off with an MBO a strong possibility for the former. The next few weeks could be interesting and certainly worth watching!

* NB

Guidelines for the categorisation of results are as follows and are always in comparison with the equivalent period for the previous year; pro forma numbers are ignored (the terminology may vary slightly from country to country).

* Excellent: Both revenue and net income growth is in excess of 50%.

* Very good: Both revenue and net income growth is in excess of 25%

* Good: Both revenue and net income growth is in excess of 10%.

* Satisfactory: Revenue is within 10% of previous year and net income is up.

* Mediocre: Either revenue and/or net income is down.

* Very poor: Net income is less than 1% of revenue.