Merger, takeover bids take the spotlight

The Sonera/Telia merger and the continuing squabbles re the HP/Compaq deal dominated the international world of IT and telecommunications during the last two weeks.

At home, the Mustek/Rectron merger and the DataMirror/Idion activities stole much of the local headline space in the IT/telecoms context.

• we saw a satisfactory set of full-year figures from ShawCell (revenue and net profit both up a little);
• a mediocre set of full-year numbers from Dynamic Cables (revenue and net profit both well down);
• a very poor set of annual (10 months) figures from Cape Empowerment Trust (no revenue);
• a full-year loss from Square One Solutions Group (but revenue up); and
• an interim loss from Intervid (but revenue slightly, although turnover down).

The results of two local surveys were released last week. In both instances, SA technology companies didn`t fare very well.

Paul Booth, MD, Global Research Partners

Additionally, E-Data has been warned of a possible share suspension because of its late submission of its annual financial statements, and Elexir`s listing has been annotated and could be suspended following an adverse audit opinion in its annual financial statements.

[Local]

Other local news included:

• the listing today of Spectrum Shipping following a reverse take-over of Micrologix, thus marking the end of yet another technology stock;
• the temporary closure of Computerweek`s Techaccino;
• the announcement that Mustek intends to acquire Rectron, with the latter subsequently being de-listed;
• the announcements of staff cuts from IQ Business Group, mainly as a result of the integration of Financial IQ (formerly a joint venture with Fedsure Financial Services Group) into the group;
• the formal name change of Vodacom World Online to Tiscali, following the sale to Tiscali of Vodacom`s remaining 40% stake;
• the proposed take-over of Unihold by Clidet, an Absa-backed private equity firm;
• the announcement that an investigation is to be launched into the affairs of Safika Holdings;
• the formal bid for Idion by DataMirror;
• the resignation of Peter Gerson, MD of Cognos SA;
• the appointments of Vernon Lease as the new CEO of Spescom RSA and Nigel Matthews as non-executive chairman of Prism Holdings, instead of Alvin Els;
• the resignation of Ivan Ferrer (originally "Mr Pastel") from the Softline board;
• the resignations of several Prism directors; and
• Mark Shuttleworth`s announcements of the targets for his initial investments via his venture capital fund.

• we saw the announcement of a restructuring at Fujitsu that it is hoped will return the company to profitability in the next financial year;
• the merger of Sonera of Finland and Telia of Sweden, thus creating the first-ever cross-border tie-up of two former State-owned telecoms companies, and a company with a joint revenue that is in excess of $8 billion;
• the sell-off by the founders of MobilCom of their stake in the company, thus resolving an acrimonious dispute with France Telecom;
• the signing of a strategic alliance, worth $5 billion, between Philips Electronics and Dell;
• Verizon`s move to cut its stake in Argentina`s CTI;
• the collapse of Nitel`s (Nigerian Telecom) privatisation;
• the restructuring at Compuware and the closure of a number of its offices; and
• the collapse of the plan to merge the non-US interests of Andersen and KPMG.
• Additionally, the estimated cost of the HP/Compaq deal is being put at something in excess of $232 million. Walter Hewlett has filed a lawsuit against HP, questioning the manner in which the company solicited last-minute proxy votes.

Additionally, look out for the possible tie-up by the new Sonera/Telia group with a Danish telecoms company, TDC; the outcome of another demand from Ranger Governance for the removal of top executives from Computer Associates; the possible purchase of a stake in Telecom Argentina by Mexican telecoms operators; the buyer for Shaw Comms US cable systems unit; the outcome of the defaulting by Telecom Argentina of principal payments on its $3.3 billion debt; and Microsoft and the Department of Justice`s reaction to the latest monopolistic accusations by Liberate Technologies re Microsoft`s attempt to stifle competition in the interactive television market through its $12.4 billion worth of holdings in the global cable television and telecoms industry.

The new telecoms group, yet to be named, following the merger of Sonera and Telia, will be chaired by Tapio Hinikka, Sonera`s present chairman. As yet, no CEO has been named, but Sonera`s CEO, Harri Koponen, will become the deputy CEO of the new group, with the Telia CEO, Marianne Novert, expected to retire in August as originally planned. The current State holdings in both companies are expected to reduce over the next five years. Once the deal is completed, Telia`s shareholders will own 64% and Sonera`s shareholders 36% of the new company.

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

[International]

Other international news included:

• the appointments of John Ambroseo as president and CEO of Coherent, Bernar Couillard as chairman of Coherent, Robert Dutkowsky as chairman of JD Edwards, Gene Eidenburg as executive chairman of InterNAP Network Services, Lou Ennuso as CEO of Adeptia, JimHarrer as CEO of Starbase, Rex Jackson as president and CEO of Atlantes Services, David Lockwood as CEO of InterTrust Technologies, Edward Marino as president and CEO of Presstek, Greg Peters as CEO of InterNAP Network Services, Andrew Roscoe as president and CEO of o2wireless, John Snedegar as president and CEO of Micro General, and Hans Snook as chairman of Carphone Warehouse;
• the resignations of Steve Bauman, CEO of Vina Technologies, Rick Belluzzo, president and COO of Microsoft, Enrique Fiallo, president and CEO of Enterasys, Mike Levine, president of Meta Group, and Glenn Nortman, CEO of 5B Technologies; and
• job loss announcements from American Superconductor, BCE Emergis, BT Group, Ciena, Compuware, Epic Data, Fujitsu, Hybrid Networks, IEC, Pacific Century CyberWorks, Rogue Wave Software, WorldCom and Xybernaut.

We saw excellent figures from Audiovox (back in the black).

Good numbers were recorded by Acta Technology, Angoss Software (back in the black), Covad Comms (back in the black), Datatel, eXI Wireless, International Electronics, Science Systems, SES Global, Swisscom and TSI Telecommunication Services.

Satisfactory results were posted by DPAC Technologies (back in the black), Global Maintech (back in the black), Microtel and Unilog.

Mediocre returns came from Cellular Technical Services (but back in the black), CVD Equipment, DA Consulting Group (but back in the black), Digital Power (but back in the black), Digital Video Systems, GFI Informatique SA, Glentel (but back in the black), Gtech Holdings, Netsmart Technologies, Oce NV, Recticon Enterprises, Teknowledge and UniPress Software.

Losses were announced by1mage Software, ACI Telecentrics, Adelphia Comms, Advant-e, Affinity Technology Group, AirNet Comms, Algol SpA, AlphaNet Solutions, Alpine Group, Apogee Technology, Applied Digital Solutions, ARC Wireless Solutions, Astea International, Bridge Technology, Cimetrix, Comdial, CommScope, CoreComm, Corel, CTI Group, Datalogic, Davel Comms, Diversinet. Dynacore holdings (was Datapoint), e-SIM, eB2B Commerce, Elbit, Elron Electronics Industries, Electronics Systems Technology, Emblaze, Entegris, Essex, FairPoint Comms, FiberCore, FullNet Comms, GenTek, GFT Technologies AG, GlobalSCAPE, GSE Systems, GTDATA, Hanaro Telecom, Howtek, Infocrossing, Inrad, Insilco Holding, Integrated Telecom Express, Intelli-Check, Interland, Intraware, ISCO International, Leitch Technology, Level 8 Systems, Liberate Technologies, Liberty Media, Manugistics, MEMC Electronic Materials, Meridian Holdings, Nestor, Network-1 Security Solutions, nStor Technologies, NuVox Comms, Oberthur card Systems, Optio Software, Paradigm Advanced Technologies, PlanetCAD, PurchasePro. Com, Riverstone Networks, RoboGroup TEK, Saba Software, SAVVIS Comms, Sentry Technology, SES Global, Shaw Comms, Sigma Designs, Simtek, Sirius Satellite, SL Industries, Sorrento Networks, Speedcom, Stilo International Plc., Storage Area Networks, Strategic Solutions Group, Summus, Superconductive Components, Superior TeleCom, SureQuest Systems, T-Netix, Telecom Italia, Telenetics, Teltronics, TippingPoint Technologies, Ultradata Systems, Ultrak, UnitedGlobalCom, Unity Wireless, Via Net.Works, Voice Powered Technology, Vsource, WaveRider Comms and WorldPort Comms.

Other financial news included a share buy-back announcement from Merisel; profit warnings from Airspan Networks, Alpha Industries, Artesyn Technologies, Aspen Technology, Black Box, Brio Software, BroadVision, Broadwing Comms, Check Point Software Technologies, ChipPAC, Click2learn, Commerce One, Compuware, Cray, Dicom Group, Digital River, E.piphany, Emblaze, EMC, Enterasys, F5 Networks, i2 Technologies, Ilog, Imagination Technologies Group, InFocus, Inktomi, Instinet, Interwoven, Juniper Networks, Lantronix, Legato Systems, McData, Millipore, MRO Software, Nextel Comms, Novadigm, NTT, NTT DoCoMo, Onyx Software, Parametric Technology, PeopleSoft, Pinnacle Systems, Planar Systems, Plasmon, PTC, Qwest Comms, RiverSoft, RSA Security, SmartForce, SonicWALL, Sonus Networks, Stellent, TDK, Vitria and WebMethods.

There was also a share split announcement from Liberty Satellite & Technology (reverse). Additionally, Vikonics has applied for chapter 11; Williams Comms and Metromedia Fiber Network are teetering on the borders of bankruptcy; the SEC has launched a formal investigation into the accounting practices of Network Associates and Robotic Vision Systems; Xerox has agreed to restate its figures for 1997 through 2000 and pay a $10 million civil penalty; and Hybrid Networks is likely to cease operations at the end of April.

Locally

Aqua Online (+23.1%)
BTG (+21.9%)
Crux (+50%)
Explorer (-25%)
Maxtec (-20%)
Pinnacle (-23.1%)
Prism (+57.1%)
Rectron (+26.7%)
Unihold (+50.6%)

Internationally

Dice (+72.7%)
Digital River (-61.6%)
Elcom International (-42.9%)
Enterasys (-68.9%)
MRO Software (-47%)
OnSpan Networking (-52.9%)
Pegasus Comms (-42.9%)

Proxim (-47.3%)
Smartlogik Group (-43.3%)
Vixel (+70.7%)
Xchange Applications (-47.9%)

The results of two local surveys were released last week. The first, published in Business Day, was the financial reporting feedback by Ernst & Young on SA`s top 100 companies. The second was carried by Financial Mail and was oriented to Web sites and e-mail responses again involving the top SA companies, but this time undertaken by eStatSA. In both instances, SA technology companies didn`t fare very well.

In the E&Y survey, the top rated technology companies were Dimension Data, M-Cell and Reunert, but only in the "good" category (there was no technology company in either the top 10 or the excellent category), while Comparex was in the "unsatisfactory" column.

In the second eStatSA survey, the top technology company was Comparex at two, while Reunert was at 34, Dimension Data at 38 and Allied Technologies at 45.