Industry consolidation continues

Acquisitions by Cisco, HP and IBM, and the proposed merger of Scala Business Solutions and Epicor Software dominated the international world of IT and telecommunications last week.

The proposed merger of Scala and Epicor is yet another part of the jigsaw completed with respect to the consolidation taking place within the enterprise resource planning industry.

Paul Booth, MD, Global Research Partners

At home, the deal between arivia.kom and Eskom, and the results from a handful of local companies stole most of the local ICT headline space.

* we saw satisfactory year-end figures from Vesta Technology Holdings (revenue down marginally but back in the black);

* a full-year loss from Eureka Industrial (although revenue substantially up);

* a profit warning from Maxtec; and

* the suspension of Softline`s shares following the Sage acquisition.

Other local news included:

The presentations at the African ICT Achievers event of a lifetime ICT achievement award to Andile Ngcaba, the Top Black Woman in ICT award to Miriam Zwane, the Top Individual Award in ICT to Sizwe Nxasana and the Top Black Company award to Lechabile IT Services.

New local distributorships included that of Asus notebooks by Storgate Africa, Genius by Axiz, Kingmax Semiconductor and Prolink Microsystems by Esquire Technologies.

* we saw the sell-off by Philips Electronics NV of a 2.5% stake in Taiwan Semiconductor Manufacturing;

* the statement from Samsung Electronics that it expects to pay off all its debts by next year;

* Kodak`s announcement that it intends to develop services for mobile phones with cameras as part of its move away from conventional film products to digital technology;

* LSI Logic`s announcement that it will spin-off its storage systems operation into a separate company; and

* MCI sold-off its 19.26% stake in Brazilian carrier Embratel Participacoes, worth about $220 million.

Additionally, look out for the battle for the Pivotal take-over between Oak Investment Partners and Onyx Software (although my money would be on the former); and the fate of Critical Path, the messaging software and services company that needs funds to survive.

Other international news included:

* the appointments of Carl Carlson as CEO of Tricom SA, Bijan Khezri as executive chairman of Baltimore Technologies, John Moran as CEO of GSE Systems and Corey Smith as CEO of Privia;

* the resignation of Peter Morgan as chairman of Baltimore Technologies;

* the retirements of Bill Monahan as chairman and CEO of Imation and Arturo Pellerano as chairman and CEO of Tricom; and

* a job loss announcement from Hynix.

We saw excellent* figures from Bonso Electronics, DataLogic (back in the black), Electronic Systems Technology, IPayment, InterDigital (back in the black) and Xfone.

Very good* numbers were posted by Infineon Technologies AG (back in the black), Innodata (back in the black), RTIN Holdings, SYS Technologies and UGC (back in the black).

Good figures* were recorded by CGI, CSC, Dell, Ebix.com, EchoStar Comms (back in the black), iDial Networks, Island Pacific, Micronetics, NSI Software, NTT, OAO Technology Solutions, Sega, Systemax (back in the black), T-Online, Univision Comms and Vocus.

Satisfactory* figures were reported by Applied Materials, ARC Wireless Solutions, AT&T Wireless (back in the black), BEA Systems, British Telecom, Comino Group, Concur Technologies (back in the black), Creo, D&E Comms (back in the black), Daou Systems, Deutsche Telekom (back in the black), Elbit Systems, ePlus, EuroTel Bratislava, Hanaro Telecom (back in the black), Imagistics International, Infocrossing (back in the black), KPN, MasTec, PacNet, Paragon Technologies (back in the black), Quanta Services, Siemens, Teknowledge, Teltronics and TRC Companies.

Mediocre* returns came from Arch Wireless, Atos Origin, Bogen Comms, Bouygues SA, CAM Commerce Solutions, Crayfish, DataWave, Dicom Group, GFI Informatique SA, Infodata, InTechnology, Integrated Business Systems & Services, Internet America, Lason, Metrocall Wireless, Moving Bytes (but back in the black), NTT Data, Numerex (but back in the black), Pomeroy IT Solutions, ScanSoft, Sopra Group SA, SRS Labs, T-NETIX, Taitron Components, Telebyte (but back in the black), TMSSequoia, Touchstone, TransNet, Tucows and Valtech SA.

Very poor results* were posted by All American Semiconductor, Formula Systems, Intercept and Neon Systems.

Losses* came from 24/7 real Media, 3D Systems, AESP, Aether System, AirIQ, AirNet Comms, Aladdin Systems Holdings, Allegiance Telecom, Alpine Group, AltiGen, Andrea Electronics, AOL Latin America, Applied Digital Solutions, Artemis, Avatech Solutions, BearingPoint, Block Comms, BrightStar Information Technology Group, Cable & Wireless, Cabletel, Cablevision Systems, Cellular Technical Services, Cimetrix, Clarus, Cognitronics, Coherent Technologies, Cordia, CorVu, Critical Path, CSP, Data Systems & Software, Davel Comms, DDi, Digital Power, Digital Video Systems, Diversified Security Solutions, Dobson Comms, DSL.net, DynTek, EFJ, Elcom International, eMagin, Emcore, enherent, FiberMark, Fibernet, Fisher Comms, GigaMedia, GoAmerica, GSE Systems, GTC Telecom, HPL Technologies, Hytek, I-Trax, I/O Magic, i3 Mobile, IMSI, Intelli-Check, Interplay Entertainment, ITC^DeltaCom, ITEX, Jaco Electronics, JMAR Technologies, Lexent, LightPath Technologies, Loral, LTX, ManagedStorage International, Marconi, Merrimac, MetroPCS, Microvision, nCipher, NeoMagic, netGuru, Nintendo, Notify Technologies, NTL, ORBIT/FR, Path 1 Network Technologies, ParkerVision, Pegasus Comms, PerfectData, Porta Systems, Qsound Labs, RCN, Rentrak, Reptron Electronics, Rural Cellular, Sagent, SBA Comms, SeaView Video Technology, Simtek, Softbank, Speedus, Storage Computer, Superconductive Components, Sycamore Networks, Tier Technologies, Timeline, Top Image Systems, Tricom, UbiquiTel, Unity Wireless, Universal Access, US Unwired, US Wireless Data, V-ONE, VerticalNet, Webb Interactive Services, WorldQuest Networks, Xybernaut, Yell, Zap.com and Zi.

Other financial news included analyst upgrades for Brocade Comms and Lexmark; analyst downgrades for Adobe, Amdocs, BearingPoint, Sycamore Networks and Tier Technologies; share offerings from Asyst Technologies, Carrier Access, F5 Networks and ParkerVision; and share buy-back announcements from Anaren, British Telecom, CTE, Hummingbird, Interactive Intelligence, Micronetics and WorldPort Comms.

There were also positive results/profit warnings from Blue Coat Systems, Credence Systems, Deutsche Telekom, KPN and NTT; negative results/profit warnings (often veiled) from Atos Origin, BellSouth, Cap Gemini Ernst & Young, Portal Software and Xansa; share split announcements from OneLink (reverse) and Robotic Vision Systems (reverse); an excellent IPO from Tessera Technologies; and an expected IPO this week from Callidus Software.

Locally

AST (-19.6%)
Casey (-96%)
Cycad (-50%)
Elexir (+50%)
Global Technology (+33.3%)
Maxtec (-33.3%)
Prism (+30.2%)
Stella Vista (-50%)
Vesta (-20%)
Y3K (+66.7%)

Internationally

Com21 (+100%)
DDi (+204.3%)
Elcom International (+30%)
Exabyte (+61.4%)
Leap Wireless International (+36.4%)
PC Mall (+51.6%)
Portal Software (-48.3%)
Robocom Systems International (+30.8%)
SEMX (+75%)
Traffix (+24.6%)

In terms of indices, Nasdaq was down 2.1% and the JSE was down 0.15% for the week.

The proposed merger of Scala and Epicor is yet another part of the jigsaw completed with respect to the consolidation taking place within the enterprise resource planning industry.

Both of these companies are focused on the mid-market sector and both have a small base of clients locally. It will be interesting to watch how the local situation is handled. If this merger is successful, maybe some of the many other small players could be attracted into this fold.

* 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.