What a year!

There is no doubt that 2002 has been a tough year for the information and communications technology (ICT) industry as a whole, and probably the worst the IT industry has ever experienced during its 40+ year history.

This is a view the International Data Corporation has confirmed: it recently released figures showing that the IT market declined 2.3% in 2002, the worst ever over the last 20 years.

Locally, the year has been strongly influenced by overseas events.

Paul Booth, MD, Global Research Partners

Unlike the previous two years, the on-going Microsoft vs Department of Justice (DOJ) scenario hasn`t dominated the international scene, nor has the local scene been dominated by the happenings at Dimension Data.

Internationally, the year has been overshadowed by the continued fall-out from 11 September 2001 and the ICT recession, together with the WorldCom scandal and the eventual but protracted merger of HP and Compaq.

Locally, the year has been strongly influenced by overseas events, together with the happenings regarding the second national operator, the DataMirror battle for control of Idion, and the acrimonious management buyout of Comparex`s European operations.

As was the case previously in both 2000 and 2001, there have been few new listings on the JSE and a large number of casualties through a combination of liquidations, consolidations, acquisitions and conventional de-listings. The shares prices of local technology stocks have remained at a low level, but not at their worst.

An analysis at the end of November shows that of the 60+ technology shares still listed (it was 80+ last year), 19% (22% in 2001) were trading below 10c, 28% at below 50c, 11% below R1, and only 25% trading above R2, as was the case last year, with the vast majority of values still at below their original listing levels.

Share listings

The new listings were those of CCI Holdings (ex-Y2Ktec) and Beget Holdings, the latter being the first 'real` new listing since August 2000, when Sempres International Technology Holdings went public.

However, the technology attrition list includes C Information Holdings; C-Tech following a reverse take-over from Trans African and its exit from the technology market; Dectronic, following a reverse take-over from Active Value management, and its withdrawal from the technology market; E-Data following a reverse take-over from John Daniel Containers and a withdrawal from the technology market; Hicor, following its liquidation; Internet Gaming Corporation; Jem Technologies; KTL, following the unbundling of its 63% shareholding in Grintek; Spicer, following the sell-off of its remaining asset; MB Technologies, following a management buyout; Micrologix, following a reverse take-over by Spectrum Shipping and its withdrawal from the technology market; OneLogix, following the closure of its technology interests; Oxbridge Online; Power Technologies following its absorption into Altron; Rectron, following its acquisition by Mustek, which was already the major shareholder; Sempres International Technology Holdings; UAM; and Unihold, following its acquisition by Clidet, a private equity firm.

The shares of Cyberhost, Dynamic Cables and Prada Technologies were suspended.

On the unlisted front, CompuComp, Exceptional Business Systems, MPC, Netcom Solutions and Southern Focus all ceased operations and/or went into liquidation.

Major deals

Other major mergers, acquisitions or investments included those of African Cables (Marconi`s 51% stake) and IQ Works by Reunert; CSIPER Consulting by arivia.kom; Plato Computer Services (UK) and Uskotec (Old Mutual`s 40% stake) by BTG; PQ Africa by Comparex; and PricewaterhouseCoopers (JD Edwards practice) and Idion Solutions by CS Holdings.

However, several proposed take-overs failed to materialise: Labat Africa by Altech Data, Prism`s PTSS unit by Altech, and Software Futures by Paracon.

SA-based Azisa was sold to Flextronics of Singapore. Dimension Data also acquired 50% of Nedcor`s interest in Indian-based Nihilent Technologies and 3fifteen. The 20% of the MTN group held by government was sold off, but was subsequently bought back by a consortium led by MTN management.

Local movers and shakers

Key appointments during the year included those of Leslie Boyd as chairman of Datatec; Peter Flack as chairman and interim CEO of MGX; Henry Ferreira as country manager of HP; Tony Fourie as CEO of Connection Group; Gordon Frazer as country manager for Microsoft SA; David Geeringh as chairman of Global Technology; Stefano Mattiello as MD of Sun Microsystems for sub-Saharan Africa; John Miller as CEO of AST; Andy Milne as CEO of M-Web; Nomazizi Mtshotshita as chairman of Telkom SA; Phuthuma Nhleko as CEO of MTN Group; Cyril Ramaphosa as chairman of MTN Group; Dave Reddy as country manager of Veritas SA; Willie Scholtz as chairman of The IQ Business Group; and Peter Watt as acting CEO for Comparex.

Resignations included Paul Edwards as CEO of MTN Group; Ivan Ferrer of Softline ('Mr Pastel`); Rian du Plessis as CEO of Comparex; Pierre Joubert as CEO of Connection Group; Aletha Ling of MGX; Roux Marnitz as chairman of Comparex Africa; Ronnie Price as chairman of MGX; Johan Roets as group CEO of The IQ Business Group; and Nick van Noordwyk as MEA regional director for Veritas Software.

Additionally, Martin Vergunst, MD of CSC in SA, will head-up the company`s global financial process outsourcing operation, which will be based in Cape Town.

Branching out

New South African offices were opened by Alcatel SA, following Altech`s sell-off of its shares in Alcatel Altech Telecoms; AspenTech Africa (US-based parent); BMS Solutions (Australian-based parent); InterSystems (US-based parent); London Bridge Software (UK-based parent); Mitel Networks (US-based parent); SAVI Technology, Venture Communications (an African-based parent); and Winslow Consulting Group.

However, Ascential Software, Controlware, RSA Security, Sitara Networks, SmartForce and VerticalNet closed their local offices.

Additionally, CenterField Software was created via a management buyout of Ascential Software SA; Intelligent Systems and Centratel (Siltek Telecomms) emerged from the Siltek debacle; and Kwebo Networking was established by ex-managers of the Sitara Networks South African subsidiary.

SuSE Linux appointed Mico as its local outlet, Versant appointed Silverbreeze as its South African distributor and Teligent appointed Telsar Africa as its local representative.

Media moves

On the media front, Kagiso Media sold off its 50% stake in Systems Publishers; Smart Office Computing closed its doors; Business 2.0 changed its name again, this time to Intelligence Total Business; Mobile & IT news became the quarterly What Mobile & IT; and African Achievers, The Industry and the local version of T3 made their first appearances.

Milestones

Other significant events included the local merging of the HP and Compaq operations, which has, in my opinion, been far from successful, leaving the 'new` HP with an ex-Compaq dominated management team and a significant unhappiness level among staff.

Additionally, we saw Cell C break through the 1 million subscriber level; the tying up of both MTN and Vodacom with Intelsat SA in the furtherance of their spread into Africa and in particular into the remote areas of many countries, particularly where no terrestrial infrastructure exists; and ERP.com`s successful completion of its three-year tenure in the venture capital market prior to its move to the main board, a first in SA.

The government approved Nexus as the black economic empowerment partner for the second national telecoms operator; Venfin invested $1 million in Dimension Data; and a new chairman was appointed at MGX to oversee a major strategic review following a disastrous year for the group, which still hasn`t resolved the EC-Hold situation.

The year also saw Gestetner change its name to NRG Group, Ixchange change to FrontRange and M-Cell to the MTN Group.

2002 also saw the emergence and visibility of many of the so-called 'hidden champions`, which are attracting attention both locally and overseas. Some of the names that spring to mind are Cirrus TechVue with its secure printing technologies that are also being exported; Consiliarii with its Clockworks product oriented to the science of time management; KeyTools with its mobile solutions (the company has opened a European operation); and SecureWorx, which is producing security software for both the local and overseas markets.

Accolades

• Benjamin Mophatlane of Business Connexion was named CSSA IT Personality of 2002;
• Sizwe Nxasana, CEO of Telkom SA, was named Black Business Quarterly`s Black Businessman of the Year;
• Sharoda Rapeti was the overall winner in the Forge Ahead BMI-T African Achievers event; and
• Business Connexion was awarded Black Business Quarterly`s Best Performance & Productivity Black Business for 2002 award.

As was the case in 2001, this year was dominated by the continuing job loss announcements and profit warnings. However, in 2002 it was coupled with an unprecedented number of Chapter 11 activities, including household names such as NTL and Polaroid; and the re-stating of financial accounts by many companies, sometimes dating back several years (Xerox re-stated several times).

This year saw few initial public offerings. We also saw a record $54 billion loss recorded by AOL in Q1 and the closure of ExciteAtHome.

Acquisitions and mergers

• The Comcast/AT&T Broadband merger was given the go-ahead to create the world`s largest broadband company;
• The protracted merger of Compaq and HP to create the world`s second largest IT company;
• IBM purchased PwC Consulting and Rational Software;
• Microsoft acquired Navision;
• KPMG Consulting took over most of Andersen`s consulting operations;
• Hitachi bought IBM`s disk-drive operations and Sanmina-SCI bought its desktop PC manufacturing;
• CMG and Logica merged to produce a major European IT services group;
• Hitachi and Mitsubishi merged their chip operations, creating one of the world`s largest chip producers;
• Deutsche Telekom purchased DaimlerChrysler`s shareholding in Debis Systems; and
• Telia (Sweden) and Sonera (Finland) merged.

International movers and shakers

Michael Armstrong was appointed as chairman of AT&T Comcast; Thierry Breton as CEO of France Telecom; Michael Capellas as chairman and CEO of WorldCom; David Dorman as chairman and CEO of AT&T; Samuel Palmisano as CEO of IBM; and Ben Verwaayen as CEO of British Telecom.

Resignations came from Louis Gerstner as CEO of IBM (retirement); Walter Hewlett from the board of HP; Charles Lee as co-CEO of Verizon Wireless; Sir Ralph Robins as chairman of Cable & Wireless; Geoff Unwin CEO of Cap Gemini Ernst& Young; and Charles Wang as chairman of Computer Associates.

Major events

• The on-going Microsoft/DOJ battle;
• The collapse of WorldCom;
• Many technology companies, including 3Com, Ariba, Broadvision, Novell and Palm, disappeared from the Nasdaq 100 index;
• Palm split into two operations; and
• The ongoing rationalisation among many of the European telecoms companies, both fixed and mobile, not least of which was the German government`s bail-out of MobilCom, following the withdrawal of France Telecom`s support.

I believe that next year the local scene will be heavily influenced by the move towards black economic empowerment within the ICT sector. The dichotomy we face is that many companies are seeking genuine partnerships in this regard, but the market is very thin, comparatively, in this area.

Predictions

• Further rationalisation among those companies listed on the JSE, with Aqua Online and Crux already earmarked for de-listing;
• Increasing adoption of the recommendations of the King 2 commission, particularly with respect to the constitution of boards of directors;
• The emergence of many more 'hidden champions`; and
• The continued examination of ICT-related spend with a view to achieving short and effective return on investment at the expense of 'long` projects.

Next year will, hopefully, see the take-off of GPRS, the introduction of the second national telecoms operator, Telkom SA`s initial public offering, and the availability of usable broadband capabilities at reasonable costs.

On the international front, the new business priorities that emerged this year will continue, specifically with respect to corporate security issues that involve e-mail and Internet usage vetting.

We will also see the practice of CEO and CFO sign-offs of financial accounts increase as a direct result of the many financial irregularities that have been prominent throughout 2002.

Look out for

• SAP swallowing the remaining shares of Commerce One that it doesn`t already own;
• The possible acquisition of another consulting group by a major IT company, following IBM`s acquisition of PwC earlier this year;
• The fate of Xerox, which has been riddled with financial scandals and is still struggling to handle the impact of the digital age, particularly within its large non-digital user base; and
• Major telecommunications companies will re-focus on their core business, shedding even more of their non-core operations, a process that started earlier this year.

From a technology perspective, business exploitation of the new mobile opportunities will be key, and we should expect many new and exciting developments in the personal digital assistant/smart cellphone arena together with all the software implications that this implies.

The merging of tablet technology with notebook technology should also be prominent. However, I don`t see any major breakthroughs in 2003 in the voice recognition field.

I believe we have seen the back of the recession, although a full recovery is still going to be a long process and one that is likely to take the whole of 2003. However, I am convinced that it is extremely unlikely that we will ever return to the dizzy heights achieved during the late 1990s and the unrealistic share prices and price/earnings ratios that were commonplace at that time.

Despite the new constraints that have been put in place, now is the time to implement and spend on new technology. The impact of not doing so now will certainly have a significantly negative impact on organisations and their competitiveness in the years to come.