The financial scandals continue

The massive WorldCom fraud/scandal revelations, the latest accounting fiasco at Xerox and the flood of profit warnings dominated the international world of IT and telecommunications during the last two weeks.

There has been some horrendous information coming from the financial reports of many multi-national companies over the past few weeks.

Paul Booth, MD, Global Research Partners

At home, Telkom`s results and its failure to meet its targets re lines, etc, the boardroom shake-up at Comparex, the Idion AGM and the CS Holdings/Idion Solutions acquisition stole much of the local IT/telecoms headline space.

* we saw satisfactory annual numbers from Telkom (revenue and net profit both up slightly);

* full-year losses from Hicor (revenue also down) and Prada Technologies (revenue also down significantly);

* profit warnings from DNA Supply Chain and Prism; and

* the terminations of the listings of Central Information Holdings, Jem Technology Holdings and Oxbridge Online.

* Additionally, Cape Empowerment Trust is in danger of having its shares on the JSE suspended for failing to submit its annual financial statements timeously, while Cyberhost has been granted a temporary extension of its listing.

Local acquisitions, mergers, investments etc (see attachment).

Local Cautionary Notices (see attachment).

Local Result Summaries (see attachment).

Local Major Event Summary (see attachment).

[Local]

Other local news included:

* the creation of the first black-owned and controlled Internet service provider, part of the J&J Group, originally founded by Jay Naidoo;

* the appointments of David Durek as acting chairman of Comparex and Reg Berkowitz as deputy chairman of Comparex and the resignations of several non-executive directors of Comparex including chairman Russell Chambers;

* the ruling by ICASA that Telkom must provide AT&T with facilities, a battle that had been going on for over two years;

* the appointments of Gordon Frazer as MD of Microsoft SA (replacing Mark Hill who is moving to Redmond in the US), Dave Reddy as country manager of Veritas Software SA, and Cyril Ramaphosa as chairman of M-Cell;

* the retirement of Tom Barry, COO of Telkom;

* Spicer`s announcement that it is close to the finalisation of the deal to dispose of its outstanding assets, thus paving the way for an orderly closure of the company;

* the announcement that MGX and Paracon are in discussions that would see MGX Software Futures, a subsidiary of MGX, being acquired by Paracon;

* the announcement of a reverse take-over at Community Technologies (C-Tech); and

* the news of significant retrenchments at I-Fusion.

* Additionally, following the eventful Idion AGM, DataMirror indicated that it had formally asked the Securities Regulation Panel to probe concert party actions by certain Idion directors.

* we saw significant activity involving key figures in the WorldCom scandal;

* the announcement that CEBIT America will hold its inaugural event in the US in June 2003;

* a renewed proxy battle by Ranger Governance, led by Sam Wyly, for the control of Computer Associates, following its previous defeat last year;

* Microsoft`s alliance with the Chinese government in order to help the development of the Chinese software industry;

* the name changes of Netgateway to Imergent, Overland Data to Overland Storage and Peregrine Control Technologies to Nighthawk Systems;

* the sale of the world`s billionth PC;

* the possible sell-out by Italian ISP Tiscali to Wanadoo or T-Online;

* the purchase by AT&T of the shares of AT&T Canada it doesn`t already own;

* the denial by the French government that it is to renationalise France Telecom; and

* the plan by Alan Sugar, founder of Amstrad, to take LSE-listed Learning Technology private.

Additionally, look out for the continued fall-out from the WorldCom and Xerox accounting debacles; the effects on EDS of the WorldCom fiasco as part of the impact of its outsourcing contract that accounts for 2.5% of its total revenues; the outcome of the break-up of KPNQwest NV; the possible sale by WorldCom of its local phone operations to IDT; the outcome of a renewed bid by Network Associates for the remaining 25% of McAfee.com it does not already own; the acquisition by Royal KPN NV of bankrupt KPNQwest at a very low price; and the outcome of an investigation into possible financial misconduct by the former CEO of PNC Telecom.

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

[International]

Other international news included:

* the appointments of Todd Bradley as CEO of Palm Solutions Group and Ransom Love as president and CEO of Caldera International;

* the resignations of Susana Malcorra, CEO of Telecom Argentina Stet-France Telecom SA, David Mushin, CEO of Knowledge Support Systems, James Poynter, CEO of NEON Systems and Scott Sullivan, CFO of WorldCom;

* and job loss announcements from Alcatel SA, Bookham Technology, Business Objects, CAP Gemini Ernst & Young, C-Cor.net, Digex, EDS, HP, i2 Technologies, IBM, LightPath Technologies, Loudeye Technologies, Manugistics, Motorola, On2 Technologies, Scientific-Atlanta, Skyworks Solutions and WorldCom.

Good numbers were recorded by Alliance Atlantis Comms, Interland (back in the black), International Electronics (back in the black) and Wegener (back in the black); and satisfactory ones by Audiovox (back in the black), CSI and Oce NV.

Mediocre returns came from ANGOSS Software Group, APT Satellite Holdings, Entegris and ePlus.

Losses were posted by 3Com, ADE, Advantest, AML Comms, Broker Technology, Corel, DataMetrics, Fayrewood, Frequency Electronics, Geac Computer, H-NET.net, iMagicTV TV, InterVoice-Brite, Intraware, Lantronix, Merix, Micron Technology, Palm, Prologic Management Systems, Red Squared, Research In Motion, Saba Software, Shaw Comms, Swan SA, TeleWork Systems, Vega Group and Xansa.

Other financial news included share buy-back announcements from Advent Software, Avistar, BellSouth and Pegasus Comms; profit warnings from Advent Software, Alcatel SA, AMD, Anadigics, Articon-Integralis, Aspen Technology, Catapult Comms, Cirrus Logic, Computacenter, Compuware, Concord Comms, Dialog Semiconductor, E.piphany, Embarcadero, Exabyte, Financial Objects, Gadzoox Networks, GSI Commerce, i2 Technologies, iManage, Inrange Technologies, Jacada, JDA software, Kana Software, Knowledge Support Systems, Loral, Loudeye Technologies, Manugistics, Media 100, Mentor Graphics, Micro Semiconductor, Micromuse, MIPS Technologies, Motorola, Novatel Wireless, Openwave Systems, Overland Storage, Pace Micro, Paxson Comms, PLX Technology, Primus Knowledge Solutions, Quantum, Rational Software, RealNetworks, Rogue Wave Software, Siebel, Sipex, Spirent, Stellent, TranSwitch, WebMethods, WorldCom, Xansa and Xerox.

There were share split announcements from Imergent and INFe, and the withdrawal of the planned IPO by Yell. Additionally, Lantronix is to re-state its figures for 2001 and Q1&Q2 for 2002, WorldCom is to re-state the numbers for 2001 and Q1 2002, and Xerox is to re-state its numbers, yet again, for a period covering several years. Furthermore, Adelphia Comms has filed for Chapter 11, but Komag has now emerged from it.

Locally

Aqua Online (+28.6%)

Cape Empowerment Trust (-25%)

Casey (+300%)

Crux (+150%)

DNA (-28%)

Elexir (-25%)

ERP.com (+22%)

Hicor (+33.3%)

Labat Africa (-40.8%)

Prism (-49.2%)

Sekunjalo (-28.6%)

Zaptronix (-33.3%)

Internationally

Cirrus Logic (+50.8%)

Conexant (-51.9%)

Digex (-60.9%)

InterVoice-Brite (-51.5%)

Qwest Comms (-66.7%)

Openwave Systems (-58.1%)

Paxton Comms (-52.6%)

PCD (+57.4%)

RMH TeleServices (-66.6%)

WorldCom (-79.5%)

There has been some horrendous information coming from the financial reports of many multi-national companies over the past few weeks. We should not fool ourselves that these will not have some local impact, as we are now part of the global community.

For example, we need to be wary of the fall-out from the WorldCom fiasco that is likely to impact local entities such as UUNet and Telkom; and the continuing Xerox accounting saga is also likely to have some form of "knock-on" effect, even if it is limited to causing grave concern among its user community.