Mergers: One on, one off

The merger of Lycos and Terra Networks, the Internet arm of Spain`s Telefonica, and the termination of the proposed merger of Corel and Inprise/Borland dominated the international IT and telecommunications world last week.

At home, the flood of local results and the on-going debacle at Brainware stole local headlines.

The $12.5 billion Lycos/Terra Networks deal creates the world`s third largest Internet company and one which will serve both the English-speaking and Hispanic communities. Terra Networks is 66% owned by Telefonica and is Europe`s largest publicly traded Internet company.

• we saw excellent year-end numbers from Datatec (although margins down);
• good full-year results from Softline (revenue static following the disposal of the hardware business and income well up);
• a full-year loss by I-Fusion (revenue up 20%; but second half-of the year very poor compared to the first half) and USKO (17 months figures and a massive loss);
• satisfactory interims from Aqua Online and EC-Hold (margins heavily squeezed);
• the satisfactory listing of Aqua Online;
• a profit warning from Interconnective Solutions; and
• the suspension of the shares of Pentacom for four weeks, pending subsequent compliance following its I-Fusion deal.
• Additionally, today sees the transfer of UAM to the media sector of the JSE.

The strong emergence of Aqua Online last week on the JSE through a reverse listing into the Absec cash shell, underpins its inherent strength and its strong revenue growth, especially from the European and North American markets. Indications are that it will be one of the strongest companies in the venture capital sector, and thus one to watch with much interest.

The $12.5 billion Lycos/Terra Networks deal creates the world`s third largest Internet company and one which will serve both the English-speaking and Hispanic communities.

Paul Booth, Columnist, ITWeb

The Bidvest acquisition of I-Fusion creates a potentially significant e-business force in the market. Bidvest already has one of the largest IT networks in the country, especially when the capabilities of CompuClearing are included. Bidvest has a major stake in CompuClearing, which has one of the largest installed bases of AS/400s in the country, and is the dominant player in the freight clearing business. There are certainly synergistic opportunities following this acquisition.

[Local]

[Cautionary]

[Listing]

[Result]

Other local news included:

• the announcement by Rock-IT that it would not be injecting funds into Brainware and subsequent news from Brainware that it is to sell-off its subsidiary companies and probably de-list;
• Dana Buys, the founder and chairman of Ixchange, is to take up the CEO position at US subsidiary, GoldMine Software;
• IST has called in a team of turnaround specialists following its disappointing year-end results; and
• Interconnective Solutions is close to finalising an empowerment deal.
• Additionally, Softline and SVI, in which Softline is a major shareholder, are said to be in discussions re a possible "merger/take-over".

• we saw a strange coincidence with the sell-off of Amdahl`s UTS Unix software business on the same day that IBM announced Linux support on its S/390 mainframes; and
• the take-over of Sprint by WorldCom looks as if it will be blocked by the regulators.

[International]

Other international news included:

• the appointments of Barry Morris as CEO of Iona Technologies and Patrick Tinley as President and CEO of Ross Systems;
• the resignation of Kevin Kalkhoven, CEO of JDS Uniphase; and
• the name changes of Digital Microwave to DMC Stratex Networks and Infinite Technology to Flexxtech Corporation.

We saw excellent figures from ADC Telecomms, Analogue Devices, Brocade (back in the black), Ciena (back in the black), Credence Systems (back in the black), Data Systems & Software (back in the black), LTX, Lycos (back in the black), Network Appliance, Nvidia, Portal Software (back in the black), SBE (back in the black) and Sycamore Networks (back in the black).

Losses came from 360Networks, Adelphia Comms, Applied Digital Solutions, Aquis Comms, Astea, Barak, BEA Systems, Birch Telecom, Bookham Technology, Brokat, BTI Telecom, CacheFlow, CDSI, Cereus, Clearnet, ConMat Technologies, Davel Comms, eBaseOne, EpicEdge, Equant, Frontline Comms, GateField, General Automation, Global Maintech, Hadron, Hanaro Telecom, hongkong.com, Indigo, Infobank International Holdings, Kensington International Holdings, KMC Telecom, Legato Systems, MAI Systems, Microtel, NCD, Network Systems International, Niku, NTL, NTS, ParkerVision, Pointe Comms, PrimaCom, Recognition Systems, Sequoia Software, Socrates Technologies, T-NETIX, Telewest Comms, Top Image Systems, TTI Telecom International, United Pan-Europe Comms NV, Ultradata Systems, View Tech, Westell Technologies and Zonic.

Good numbers were recorded by Advanced Digital Information, Autodesk, chinadotcom (back in the black), HP, Kyocera, NCS, Network-1 Security Solutions (back in the black), NZ Telecom, Telefonica and Telewest Comms.

Satisfactory results were reported from Agilent Technologies, Centigram Comms (back in the black), Computer Associates, ForSoft, Recticon Enterprises (back in the black), Telebyte, ViaSat and VSI Holdings.

Mediocre returns came from ACI Telecentrics, British Telecom, Global Telecomm and Philippine Long Distance Telephone.

Very poor results came from All Comms (but back in the black), Digital Power (but back in the black), Display Technologies, GSE Systems and Multi-Link Telecomms.

Other financial news included profit warnings from American Software, Compel Group, Logility, MSW Technology, Parity Group and SGI (MIPS spin-off charge); share split announcements from Intel and Vishay Intertechnology; and very successful IPOs from New Focus (Fibre optics) and Parthus Technologies (semiconductor intellectual property software).

Additionally, Inacom seems to have a cash-flow problem and may sell-off some assets; and Corel, following the breakdown of its merger with Inprise/Borland, could well run out of money very soon.

Locally

ASAS (+40%)

Brainware (-57.1%)

Cyberhost (-22.2%)

E-Data (-32.4%)

Explorer (+46.7%)

I-Fusion (+36.8%)

Paradigm (-44.9%)

SecData (-37.5%)

Y2KTec (-25%)

Internationally

Able Telcom Holding (-34.2%)

Agilent (-26.4%)

Atlantic Telecom (-28.5%)

Anacomp (-28%)

Baan (-32.2%)

Baltimore (-37%)

KPNQwest NV (-25.8%)

Lightning Rod Software (-28.1%)

Portal Software (+30.4%)

SSA (-32.2%)

Telewest Comms (-25.9%)

Tomorrow sees the start of the "crazy" exhibition season, with the opening of Computer Faire, followed in Gauteng by at least six others before mid-October. I wonder how long it will take before sanity prevails, and we learn lessons from overseas.