Momentous year for IT, telecoms

The year in review

There is no doubt that 1999 has been a momentous year for the IT and telecommunications industries. We have seen an enormous number of acquisitions, both locally and internationally; and there have been over 30 local listings on the JSE.

While the overseas stock markets are still on a major `bull` run, locally we have witnessed a major polarisation between the handful of very large and successful IT/telecommunication companies, and the numerous small ones, whose share prices, generally, are extremely low, and often below their original listing price. I have tried to summarise the business events that in my opinion have been the most significant, and have had, or will have the most impact.

The company that has dominated the overseas headlines has to be Microsoft. It has been involved, and still is, in a legal battle with the Department of Justice over alleged monopolistic practices, and has recently had a major ruling against it. But the case is far from finished and could well drag on through 2000 into the year 2001. It has also made some interesting and strategic acquisitions, such as Visio, and undergone a major re-organisation.

Locally, Dimension Data has been dominant. It has undergone some major re-organisations, particularly with its software entities, including SPL. It has made some major overseas acquisitions, and has lost its share in EDS Africa. It is also likely to win the race to be the first SA IT company to obtain an overseas listing, although Datatec is also pushing very hard in this respect.

The international scene in 1999 seems to have had much of its activities within a few key areas: telecommunications, customer relationship management (CRM), networking, portals/internet and e-commerce/business.

In the telecommunications space we are still in the middle of the battle between UK`s Vodafone AirTouch and Germany`s Mannesmann, who recently acquired UK-based Orange Plc.

Additionally, we saw the investment in Japan Telecom by both AT&T and British Telecoms, who are also working together in many places outside their home markets, the awakening of the European telecoms giants such as Deutsche Telkom, Olivetti and France Telecom, and a flurry of activities/acquisitions involving these players, the take-over of Germany`s E-Plus by BellSouth and Netherlands-based KPN, and the acquisition of Sprint by MCI WorldCom, the world`s largest ever transaction.

In the area of CRM, we have seen as many different definitions of it appearing as we have had participants. Nevertheless, there have been some key alignments. These include Nortel Networks swallowing up Clarify, PeopleSoft taking over Vantive, and a strategic tie-up between Siebel and IBM, who strongly denies that a take-over of the former is on the cards.

On the networking front we had the acquisition of Ascent by Lucent Technologies who also made several other take-overs; Cisco making many purchases as usual, Alcatel swallowing Xylan and GEC taking Fore Systems, to name but a few of the numerous happenings that have happened in this sector during the year.

In the world of the Internet/portals, we had some very significant consolidations early in the year. These included Yahoo acquiring GeoCities and Broadcast.com, Lycos swallowing US Networking, Excite and At Home merging; Comcast ending up with MediaOne, PSINet becoming an major international collector of ISP`s, and MindSpring Enterprises and Earthlink Network joining to become the No 2 player behind AOL.

Finally, in the e-commerce/trading arena there has been a proliferation of activity including, in many cases, start-up companies and other very small players, many of which could well become the `big` boys of tomorrow.

Other major acquisitions of 1999 include Getronics buying Wang, Storage Technology purchasing Data General, Computer Associates taking Platinum Technology, Xerox taking over the printing arm of Tektronix, Sun Microsystems acquiring Forte, Compuware gobbling up Viasoft, GEAC absorbing JBA, Philips buying VLSI, British Telecom acquiring Control Data, and the sell-off by Compaq of their Alta Vista unit to CMGI. This list includes several household names that are now likely to have disappeared on a permanent basis.

Other significant activities of 1999 included the splitting-up of Hewlett Packard, the strategic alignment of Siemens and Fujitsu, and the on-going woes being experienced by most of the Japanese players in these markets.

The most significant resignation this year was by Pfeiffer from Compaq, a company which has gone through a torrid time this year, following its take-over of Tandem and Digital Equipment in the preceding years.

In the local marketplace, there were many major acquisitions and alignments not already mentioned above. These included the purchase of Pastel Software by Softline, the alignment of Altron with USKO, some "rationalisation" between Siltek and Datatec, the merger of AST and Abraxas, and the absorption of Amdahl SA into CCH.

Additionally, we had UDI being declared by Baan SA, to become SoftworX, and SSA SA to become Armada and subsequently part of Labat Africa, and conversely, the setting up of local offices in the country for the first time by Comverse Technology, Lawson Software, Marlborough Stirling and Merant.

Other significant events included the breakdown of negotiations between Atio and Unihold, between Brainware and Spicer and between Altech and Reunert, the non listing of Axiz and Atio (maybe they will now list in 2000?), the break-up of Brainware, the numerous overseas acquisitions by Datatec, Dimension Data, CCH, ITI, Ixchange and Softline, and the flurry of interim and year-end losses, including CIH, Cyberhost, Elexir, JemTech, M-Web, Metropolis, Oxbridge, Stantronics, USKO, Wentech and Whetstone.

Additionally, 1999 saw a significant casualty in the form of the provisional liquidation of FSA Holdings, part of the Infiniti Group, whose own fate, at the time of writing, is also still very much in the balance.

Of the 100+ locally quoted `IT/Telecomms` companies, some 20% are trading at or below 25c, another 20% at or below 50c and yet another 15% at or below R1; thus, approximately half of the listed IT/Telecommunications companies are currently trading below their original listing price.

Key individual changes included the appointments of Aletha Ling as CEO of Computer Configurations Holdings, Chris van der Sande as CEO of Atio, and Graham Hayes as MD of Maxtec Group, and the resignations of Piet den Boer from Brainware, Marius Furst from Compaq SA, and Peter Jordi from Atio.

So much for this year. What can we expect in 2000, apart from the cleaning up of issues arising from the Y2K scenario?

Internationally, I expect to see an acceleration in the use of e-commerce and in the exploitation of the Internet, with the majority of IPO`s being in these areas, on-going consolidations within the telecommunications and networking fields, with many additional cross-combinations being created, many software companies linking strategically with the telecommunications/networking companies, as we have seen with Microsoft and Ericsson, and the `services` companies continuing to prosper as the worldwide skills shortage remains a major issue.

Locally, there should be some major consolidations, particularly involving the weaker JSE-listed companies, as well as a host of new listings (at least 20); the overseas listing of some of the larger SA players, and the continued expansion by local players further north into Africa. Additionally, the local skills shortage will continue to worsen and the need to compensate for this in a creative fashion will be paramount.

As we have witnessed for many years within the IT and telecommunications industries, 2000 will be yet another very active year as the convergence between these two sectors rapidly gains pace.

Finally, 1999 witnessed a tremendous onslaught from the creators of computer viruses, many of which caused immense damage to both business and individual systems. The use of virus protection tools now seems to be a mandatory option, but unfortunately, this may not be enough in the future and thus, the use of encryption tools and techniques will become much more of a necessity in 2000 to combat this growing menace.