Telkom share squabbles

BT Group`s proposed acquisition of Infonet for nearly $1 billion, the reporting troubles at Nortel Networks and various legal settlements by Microsoft dominated the international world of IT and telecommunications last week.

At home, the backlash surrounding Thintana Comms` proposed sell-off of its remaining shares in Telkom SA and the prospect of Saab AB making a bid for Grintek stole much of the local ICT headline space.

* We saw a positive trading update from Spescom but a negative one from Labat Africa.

Other local news included:

* The establishment of Asyst Intelligence following a 30% investment in the company by black empowerment firm Ciber Information Holdings;

* Business Connexion sold its Mosaic Software interests to US-based S1;

* WorldPay pulled out of SA;

* Thintana Comms` proposed disposal of its remaining 15.1% of shares in Telkom SA to a consortium that includes Andile Ngcaba and Wiphold. The groundswell against this proposed deal, which also has to be sanctioned by ICASA, is mounting and I, like many others, see a major conflict of interest arising with Ngcaba`s involvement in Dimension Data, Telkom and another, as yet unannounced, government entity;

* The appointment of Abe Moloele as MD of Lava Systems Africa and Makhuparetja Nyama as CEO of Grintek`s Technologies division; and

* MGX disposed of 10% of its shares in Metrofile to the Metrofile employee share trust (5%) and to Sabvest (5%).

New local distributorships included that of Thermaltake Technology by Corex.

* Mauritian IT and telecoms minister, Deelchand Jeeha, was named as winner of the African ICT Achievers Award for 2004; and

* Maroc Telecom is to float on the Paris and Casablanca stock exchanges by the end of the year.

The groundswell against this proposed deal is mounting and I, like many others, see a major conflict of interest arising with Ngcaba`s involvement in Dimension Data, Telkom and another, as yet unannounced, government entity.

Paul Booth, MD, Global Research Partners

* Microsoft settled legal disputes with Novell for $536 million and with the CCIA trade group for an undisclosed amount, although the dispute over WordPerfect is still outstanding and is the subject of another lawsuit filing;

* Microsoft`s acknowledgement that it could also have to pay up to $950 million for additional anti-trust claims, including one by RealNetworks;

* France Telecom disposed of its remaining 36% stake in multimedia company, TDF; and

* The creation of UK-Based Ezurio, a Bluetooth systems developer, through an MBO from TDK Systems.

Additionally, look out for a bid for VA Technologie of Austria by Siemens, which recently acquired a 17% stake in the company; the fate of Telcordia, a subsidiary of SAIC, which is likely to be sold to private equity groups (this is the company that was involved in litigation with Telkom SA); and the planned joint venture between KDDI and BT Group.

Other international news included:

* The appointments of Craig Barrett as chairman of Intel (May 2005), Dwight Decker as CEO of Conexant Systems, Russell Machover as CEO of R&B Computer, Syrus Madavi as chairman of Avanex, Paul Otellini as CEO of Intel (May 2005), David Ranhoff as president and COO of Credence Systems and Ken Sexton as CEO and chairman of Axentis;

* The resignations of Randolph Blazer as chairman and CEO of BearingPoint and Robert Gwin as president and CEO of ProsoftTraining; and

* Job loss announcements from Cable & Wireless, Capgemini, Nokia and Swisscom.

We saw excellent* figures from ChipMOS, CGI Holding, CSR, Datatrak International (back in the black), Ezenia (back in the black), Orascom Telecom and Scanner Technologies (back in the black).

Very good* numbers were posted by All American Semiconductor, Cetek Technologies, Deutsche Telekom, Dialog Group (back in the black), EchoStar Comms, ECI Telecom (back in the black), Innodata Isogen, Kewill Systems, MandrakeSoft SA, Net 1 UEPS Technologies, Onex (back in the black), Photonics Products Group (back in the black), Pixar, Sonic Solutions, SRS Labs, T-Mobile USA (back in the black), Telesystem International Wireless, TOM Online, Wireless Xcessories, World Gaming (back in the black) and WQN (back in the black).

Good figures* were recorded by Advanced Photonix, BEI Technologies, Capgemini, Cedara Software, CGI, Clarity Systems, Cisco, Comino Group, CSC, Dell, Gensym (back I the black), Internet Gold, Meta Group (back in the black), Pragmatech Software, Systemax, Top Image Systems (back in the black), UGS and Western Wireless (back in the black).

Satisfactory* results were announced by BEA Systems, BT Group, D&E Comms, Dicom Group, Electrocomponents, Invitel, NTT, Telefonica Moviles, Telefonica SA, Terremark Worldwide (back in the black), Worldspan and Yell (back in the black).

Mediocre* returns came from Agilent Technologies (but back in the black), Cable & Wireless (but back in the black), Communicate.com, Concur Technologies, Fair Isaac, GlobalSCAPE, Infineon, Kronos Worldwide, Marconi, Nortech Systems, Paragon Technologies, PinkRoccade, Pomeroy IT Solutions, Radstone Technology, RCM Technologies, Register.com, Scitex, Siemens, Swisscom, Telecom Italia, Translux, Tri-Vision and Vtech.

Very poor results* came from Hanaro Telecom.

Losses* were posted by Acceris Comms, ActivCard, AirNet Comms, Amistar, Andrea Electronics, AOL Latin America, Aveva Group, Axcess International, Beta Systems Software AG, Bitstream, Bluefly, Broadwing, Cablevision Systems, Cellular Technology Services, CE Software, CES Software, Cognitronics, Commtouch, Computer Horizons, Cordia, Cyberonics, Data Systems & Software, Daou Systems, Dex Media, Digital Lightwave, Digital Power, Diversinet, DSL.net, eMagin, eTechnology VCT, Farmstead Telephone Group, FfastFill, GoAmerica, GSE Systems, Heidelberg, HyperFeed Technologies, Hyperspace, i2 Telecom International, ImageWare Systems, Infonet, InfoSonics, Inmarsat, Innovex, InterDigital, interWAVE, ITC^DeltaCom, Jaco Electronics, Kana Software, LightPath Technologies, M-Wave, Maxwell Technologies, McLeod, Midway Games, MTS, netGuru, Numerex, Onvia, Paxson Comms, Peco II, Plaintree Systems, Q Comms International, Quovadx, Raining Data, Reptron Electronics, RM Associates Distribution, Sapiens, Scan-Optics, Siemens Business Services, Sipex, SiVault Systems, Softbank, Summus, SureWest Comms, TeleCity, Telewest Global, Terabeam Wireless, TeraForce Technology, Track Data Ultradata Systems, UnitedGlobalCom, Unity Wireless, Via Net.Works, Viewpoint, Volex, Voxware, WaveRider Comms, WorldGate, XO Comms, Xybernaut and Z-Tel Technologies.

Other financial news included analyst upgrades for AMD, Business Objects, Cablevision Systems, CNET Networks, Concur Technologies, McAfee, Mediacom Comms, MEMC Electronic Materials, NetEase, Nokia, Plexus, Remec, RF Micro Devices, Sanmina, Seagate Technology, Solectron, Teleflex and Terayon Comms; and analyst downgrades for Agilent Technologies, Brocade Comms, Check Point Software Technology, Chordiant Software, Ciena, Cognos, EFI, Epcos, F5 Networks, HP, InterNAP Network Services, MTS Systems, National Semiconductor, PalmSource, PeopleSoft, Pixar, Pixelworks, Plato Learning, Qwest Comms, Rogers Wireless, Salesforce.com, Sierra Wireless, Silicon Storage Technology, SRS Labs, Tekelec, Time Warner Telecom, Valassis and Virage Logic.

There were private placement of shares by Maxwell Technologies and Spescom Software; share offerings from Catapult Comms and Transmeta; private funding obtained for ClariPhy Comms, Credant Technologies, Enpocket, Extricom, IntelliReach, Interactive Systems Worldwide, Lagan, Penguin Computing, PocketThis, Sonim and Teknovus; share buy-back announcements from 3M, Cisco, infoUSA and Pegasus Solutions; negative results/profit warnings (often veiled) from Infineon, Jamdat Mobile, Sigma Designs, Telefonica Moviles, Tetra Tech and Yell; a planned IPO on Nasdaq from Ninetowns Digital World Trade Holdings, China`s largest supplier of export/import software; and a satisfactory IPO from Phoenix IT in London.

Locally

Beget (-33.3%)
BCX (+10.8%)
Elexir (+33.3%)
Grintek (+32.3%)
Infowave (+14.3%)
Pinnacle (-12.3%)
Sethold (+30.4%)
Telkom SA (+10.6%)
UCS (+12.9%)
Vesta (+66.7%)

Internationally

Commerce One (+105.6%)
Firstwave Technologies (+100%)
I-many (+36.1%)
Maisha (-37.5%)
Micro Component Technology (+46.1%)
Myratech.net (-50%)
Network Computing Devices (+66.7%)
SEMX (+69.2%)
SONICblue (+150%)
VISX (+47.3%)

In terms of indices, Nasdaq was up 2.3% and the JSE up 1.2% for the week.

Nortel Networks has again delayed the publication of its revised financial results for the last 42 months and faces the prospect of its shares being suspended on both the New York and Toronto stock exchanges if its results are not filed by mid-December.

The company`s accounting practices are also under regulatory and criminal investigation in the US and Canada. Its current stock price is down at about the $3.33 level, well down from the peak of $8.50 it reached in February.

At its present market capital value of only $13.9 billion, it could be vulnerable to a take-over bid. If I were a client of Nortel Networks, I would have more than enough reasons to be concerned about the company`s future. It has a major presence in SA.

* 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 in excess of 50%.
* Very good: Both revenue and net income growth in excess of 25%.
* Good: Both revenue and net income growth 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.