EU punishes Microsoft

The European Commission`s (EU) punishment of Microsoft dominated the international world of IT and telecommunications last week.

At home, the continuing second national operator (SNO) saga and the raft of financial results stole much of the local ICT headline space.

* We saw good year-end numbers from AdvTech (revenue just up but well back in the black);

* Good half-year figures from Interconnective Solutions (no equivalent six-month comparison);

* Satisfactory interim figures from Connection Group (revenue marginally down but earnings well up) and Integrear (revenue down slightly but earnings well up);

* Mediocre interim results from CompuClearing (revenue up but earnings down) and Pinnacle Technology (revenue marginally up but earnings slightly down); and

* A positive trading update from Telkom.

Other local news included:

The job loss announcement by Telkom SA and the continued delay re the rural telecoms licences.

Furthermore, on the local front look out for the awarding of the government`s 25% warehoused stake in the SNO to a consortium that includes CommuniTel, already a 13% stakeholder, and Gondwana Telecomms in a deal supposedly backed by funds from Old Mutual.

* We saw the EU`s decision re Microsoft;

* The creation of a joint venture for LCD-panel manufacturing by Seiko Epson and Sanyo Electric; and

* The purchase by Smart Comms, the unlisted mobile subsidiary of Philippine Long Distance Telephone, of the debt of Pilipino Telephone, possibly as a precursor to it taking a controlling stake in that company.

International strategic partnerships were announced between AXS-One and Sector, and between IntelliCorp Records and Intuit.

Additionally, look out for the possible purchase of Swisscom-owned, German-based Debitel AG, a mobile phone company, by UK private equity company, Permira, for about lb700 million; Telstra`s possible bid for Excelcomindo, Indonesia`s number three mobile operator; Swisscom`s possible bid for part of Telekom Austria; and the outcome of the talks between Vega Group and CODASciSys.

Other international news included:

* The appointments of Rob Ashe as CEO of Cognos, Neal Ater as CEO of Storactive, Russell Krapf as CEO of Ario Data Networks and Charles Miller as president of NDCHealth;

* The resignations of Michael Ruffolo as COO of Akamai Technologies and Ulrich Schumacher as CEO of Infineon Technologies AG;

* The retirement of Michael Grainger as president and COO of Ingram Micro and Ron Zambonini as CEO of Cognos (stays on as chairman); and

* Job loss announcements from MCI and Sony.

Excellent* figures from Comarco (back in the black), Merix (back in the black), RedHat (back in the black) and VimpelCom; and very good* numbers from OTI (back in the black) and SkillSoft (back in the black).

Good figures* were recorded by Actix, Cognos, EchoStar Comms, Infodata, MicroTel International and SAS; and satisfactory* ones by Swisscom and Telecom Italia SpA (back in the black).

Mediocre* returns came from China Unicom, Cincinnati Bell (but back in the black), Sopra Group SA and SRS Labs; while very poor results* were posted by Intraware (but back in the black - just) and Richardson Electronics (but back in the black).

Losses* were reported by Aehr Test Systems, Ault, Axesstel, Block Comms, Conolog, DCS Group, Diversified Security Solutions, Eleco, FairPoint Comms, FSI International, Isomet, Lattice Semiconductor, Micron Technology, nStor Technologies, palmOne, QSound Labs, Remec, SAFLINK, Telekom Austria AG, WorldQuest Networks and Zap.com.

Microsoft will appeal the decision, dragging out the final chapter on these allegations for maybe as long as four or five years.

Paul Booth, MD, Global Research Partners

Other financial news included analyst upgrades for Arris Group, Citrix Systems, Comtech Telecom and Viisage Technology; an analyst downgrade for Telmex; share buy-back announcements from Applied Materials, Banta and Telekom Austria; a positive results/profit warning from Mitsubishi Electric; negative results/profit warnings (often veiled) from Enterasys Networks and Plasmon; a share split announcement from Intrusion (reverse 4:1); satisfactory IPOs from Belgacom and Eircom; and IPO filings from Accent Optical Technologies, a company involved in the semiconductor industry; Brightmail, an anti-spam company; Leadis Technology, a mixed signal semiconductor provider; and MetroPCS, a wireless carrier.

There was also a planned IPO on the pan-European Euronext exchange by Axalto, the smart card subsidiary of Schlumberger; a planned IPO on Nasdaq by China-based software company, Kingsoft; and the shelving of IPOs by Germany-based Siltronic and X-Fab.

Locally

AdvTech (+6%)
AST (+5.1%)
Connection Group (+5.5%)
CS Holdings (+8.3%)
Edutech (-48%)
Jasco (+7.1%)
Prism (-15.2%)
Spescom (+7.1%)
Y3K (+100%)

Internationally

Cincinnati Bell (-19.1%)
Com21 (-36%)
Corio (+30%)
Elcom International (+25%)
ePresence (+26.1%)
Merix (-17.9%)
MetaSolv (+21.1%)
palmOne (+28.3%)
SONICblue (-20%)
SRS Labs (-25.7%)

In terms of indices, Nasdaq was up 1% and the JSE down 1.5% for the week.

The EU`s decision against Microsoft for monopolistic practices includes a fine of EUR497 million as well as the requirement to make available certain technical codes. The decision gives Microsoft 120 days to reveal the information needed by organisations involved in developing and distributing competing server products and 90 days to offer a version of Windows without Media Player.

Microsoft will appeal the decision, dragging out the final chapter on these allegations for maybe as long as four or five years. However, the EU`s decision EU has upset many in the US who fear job losses.

Mario Monti, who 'masterminded` the judgement, is gaining un unenviable reputation since he was also the person who led the blocking of the GE/Honeywell deal in Europe in 2001.

* 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 are in excess of 50%.

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

* Good: Both revenue and net income growth are 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.

* Loss: A loss has been recorded.