WorldCom shock waves

WorldCom`s application for Chapter 11 bankruptcy protection and the knock-on impact of this dominated the international world of IT and telecommunications last week.

WorldCom may sell-off some of its assets, but hopes to keep the UUNet operations, the consumer and long distance units, the data business, provisioning service and corporate accounts.

Paul Booth, MD, Global Research Partners

At home, the various bits of news re FrontRange and the report that the local empowerment bids for the second national telecoms operator were disappointing, stole much of the local ICT space during a comparatively quiet week.

* we saw good financial numbers from FrontRange Solutions, which is 84% owned by FrontRange Limited; and

* encouraging numbers from Swiss-based Temenos, in which Global Technology has a cross-shareholding.

[Local]

Other local news included:

* the resignations of Tal Harpaz, joint-CEO of Aqua Online, and Marc Gower, marketing director for Oracle SA;

* the announcement from the JSE Securities Exchange that it is to investigate FrontRange re insider trading;

* the closure of RSA Security`s local office; and

* the report that claims that all seven of the empowerment contenders for a stake in the second national telecoms operator are sub-standard, although the recommendation of the preferred bidder will be made on Friday, 2 August.

* we saw Xirlink`s name change to Veo;

* the news that Deutsche Telekom is now unlikely to sell-off T-Systems, as was previously hinted;

* an agreement between Computer Associates and its long-time protagonist, Ranger Governance, re an additional outside board member;

* the news that NEC will incorporate a new company named NEC Electronics Corp on 1 November to house its semiconductor business; and

* the arrest on fraud charges of the founder of Adelphia Comms, John Rigas, along with other members of his family and some former Adelphia executives.

From the information emanating from the world`s largest-ever bankruptcy filing (WorldCom), the following are some of the key messages:

* KPMG audit likely to last until the end of 2002, with the re-organisation targeted to be completed by the end of Q1 2003.

* The intention is to trim $22.5 billion off the company`s $30 billion debts, probably via debt-for-equity swaps.

* WorldCom may sell-off some of its assets, but hopes to keep the UUNet operations, the consumer and long distance units, the data business, provisioning service and corporate accounts.

* The largest noteholder is JP Morgan Trust Co which as a trustee lists $17.2 billion; and the largest creditor bank is Deutsche Bank AG, seeking $241 million.

* There are 1 000 creditors.

* WorldCom has obtained an agreement to arrange up to $2 billion in debtor-in-possession financing, of which $750 million has already been committed by several banks, including GE Capital.

Additionally, look out for the possible acquisition of Williams Comms by Level 3 Comms; the impact of the de-listing and restructuring of Key3Media Group (the organisation behind Comdex, etc) following the significant drop in conference attendance and corporate sponsorship; and the fate of Genuity following its loan default and the announcement by Verizon Comms that it is not taking up its option to buy out the company.

[International]

Other international news included:

* the appointments of Steve Aitken as president and CEO of Colt Telecom Group, Chris Alexander as chairman of Hypercom, Charles Boesenberg as chairman of NetIQ, Carlos Espinal as president and CEO of Insacell, Thomas Hogan as CEO of Vignette, William Lyons as president and CEO of Caminus, John Pluthero as CEO of Energis, Ralph Quinsey as president and CEO of TriQuint Semiconductor, Cliff Stanford as CEO of Redbus Interhouse, and Mike Zafirovski as president and COO of Motorola;

* the resignations of Edward Breen, president and COO of Motorola, Peter Burrows, CEO of Insacell, Ching-Fa Hwang, chairman of NetIQ, Greg Peters, CEO of Vignette (remains as chairman) and Sherrie Woodring, CEO of Inrange Technologies; and

* job loss announcements from Avaya, BEA Systems, Brooks-PRI Automation, Cap Gemini Ernst & Young, Cirrus Logic, Comverse Technology, Evolving Systems, GFT Technologies AG, Insightful, Jacada, Repeater Technologies, SGI and Transmeta.

We saw excellent figures from ADS Financial Services Solutions (back in the black), Altiris (back in the black), Applied Micro Circuits, Electronic Arts (back in the black), Firstwave (back in the black), InVision Technologies, Overture Services, Silicon Labs (back in the black), and Taiwan Semiconductor Manufacturing,

Good numbers were recorded by Acxiom (back in the black), Alaska Comms Systems, ARM Holdings, AsiaInfo Holdings, Cabot Microelectronics, Capita Group, CGI, ChoicePoint, Chromaline (back in the black), Cohu (back in the black), Colt Telecom Group (back in the black), Crystal Decision, Diebold, EPIQ Systems, ESS Technology (back in the black), Fiserv, ICT Group, Indra SA, Information Holdings, Intersil, j2 Global Comms (back in the black), Kingston, Kronos, Logitech, Manhattan Associates, Micronetics, Microsemi, Orange SA, PAR Technology, PayPal (back in the black), PDF Solutions (back in the black), PEC Solutions, Pegasystems, Power Integrations, Precise Software, Quality Systems, Rectifier International (back in the black), S&T Systems Integration and Technology Distribution AG (back in the black), Scala Business Solutions NV, SDL, Sonic Solutions (back in the black), Sypris Solutions, Telenor, TeleTech Holdings, (back in the black), Tessco, Tier Technologies, USA Interactive, Verisity, WebSense (back in the black) and Western Digital (back in the black).

Satisfactory results were posted by 3M, Adaptec, Alltel, Ametek, ANSYS, Avery Dennison, Banta, BellSouth, BT Group, CAM Commerce (back in the black), CenturyTel, Checkpoint Systems, CompuCom Systems, Dassault Systemes SA, Datastream Systems, Dendrite (back in the black), Eastman Kodak, EDS, Fiberstars (back in the black - just), France Telecom, Getty Images, Global Imaging Systems, Harte-Hanks, Hutchinson Technology (back in the black), Hyperion (back in the black), IDX Systems, Ikon, Imation, Insight Enterprises, Lexmark, Molex, MPS Group, Nashua (back in the black), NEC, Ptek Holdings (back in the black), Quest Software (back in the black), Radiant Systems, RADVision (back in the black), Snap-on, Sony (back in the black), Sunair Electronics (back in the black), Syntel, Teledyne Technologies (back in the black), Texas Instruments (back in the black), ThruPoint and West.

Mediocre returns came from Altera (back in the black), Anixter International, AOL Time Warner, AT&T Wireless, Autonomy, BEI Technologies, Belden, BMC Software (back in the black) Borland, Brio Software (back in the black), CDI, Check Point Software, Concerto Software, Convergys, Cymer, Digitas, DST Systems, Elevon, Elite Information Group, Forrester Research, Foundry Networks, GCI, Glenayre (back in the black), Harris, InTest, Intevac (back in the black), IXYS (back in the black), JDA Software, Keane, Kemet, Komag (back in the black), Linear Technology, Metalink, Metro One Telecomms, Mitek Systems, MTS, NCR, New Focus (back in the black), PC Mall, SBC Comms, Siemens, Silicon Storage, Software AG, Somera Comms, SRS Labs (back in the black), STMicroelectronics (back in the black), StorageTek, Symyx Technologies, Tarantella (back in the black), Telecom Italia, TietoEnator, Universal Electronics, Varian Semiconductor, Verilink, VerticalNet, Xerox (back in the black) and ZiLOG (back in the black).

Very poor results were reported by Actel (back in the black), BCE, Comshare, Covansys (back in the black), Hypercom, Made2Manage Systems, Magma Design Automation, Micrel, MSL (back in the black), New Horizons, Sanchez Computer Associates, SCM Microsystems (back in the black), Sonic Innovations (back in the black), Spectrum Signal Processing (back in the black), Technology Solutions Company (back in the black), Thomas & Betts (back in the black), Wavecom SA and Westell Technologies.

Losses were posted by 724 Solutions, 8x8, Adtegrity.com, Advanced Fibre Comms, Advanced Power Technology, Aehr Test Systems, Aetrium, Agere Systems, Alcatel, Alliance Fiber Optic, Alliance Semiconductor, Alterian, Amazon.com, Amdocs, American Superconductor, Applied Micro Circuits, Aptimus, Arc International, Ariba, Arris, Artesyn Technologies, Ascential Software, AT&T, ATG, Autocodes, AvantGo, Avaya, Avici Systems, Avistar Comms, AXT, BackWeb Technologies, Bell Canada, BindView, Blue Martini Software, BroadVision, Broadwing, Brooks-PRI Automation, BSQUARE, Bull Groupe SA, Butler International, Cadence Design Systems, California Micro Devices, Caminus, Cap Gemini Ernst & Young, Carrier Access, Catalyst International, Centillium Comms, Ceragon Networks, Chordiant Software, Ciprico, Cirrus Logic, Clarus, Click Commerce, CNET Networks, Cognex, Coherent, Com21, Computer Associates, Concero, Conexant Systems, Consolidated Graphics, CoorsTek, Copper Mountain Networks, Corio, Corning, Corvis, CoSine Comms, CTS, Cysive, Datakey, Datum, DDi, Dialog semiconductor, Dice, Digimarc, Digital Impact, Digital Insight, Digital Lightwave, Digital River, Docent, Dot Hill Systems, Edgewater Technology, Eloquent, Embarcadero Technologies, Endwave, Entrust, Epicor, Equant, eSoft, Evans & Sutherland, EXE Technologies, F5 Networks, Fairchild Semiconductor, FalconStor, Flextronics, Fujitsu, General Cable, Genesis Microchip, GlobalSpan Virata, GRIC Comms, GSI Commerce, GSI Lumonics, Hummingbird, i3 Mobile, iBasis, Image Systems, ImageX, Infocrossing, InfoNow, InfoSpace, InfoVista, Infowave, Inrange Technologies, Insight Comms, Insightful, Insignia Solution, Interactive Intelligence, InterNAP Network Services, Intrinsyc Software, Iridex, ISSI, ITXC, Jacada, JDS Uniphase, Lam Research, Larscom, Leap Wireless, Legato Systems, Lightbridge, LSI Logic, Lucent Technologies, M-Systems, Marimba, Maxtor, MCSi, MetaSolv Software, Meta4 NV, Metawave Comms, Micro Linear, MicroHelix, Microtune, Mobius Management, MRV Comms, MSC.Software, N2H2, Nanophase Technologies, Netegrity, NetIQ, Netopia, NetScreen Technologies, Network Engines, NexPrise, Next Level Comms, Nextel Partners, Novadigm, Novatel Wireless, Nuance, Oak Technology, Occam Networks, ON Semiconductor, Onyx Software, P-Com, PDSi, Peak International, PECO II, Pemstar, Pericom Semiconductor, Pivotal, PracticeWorks, Predictive Systems, Presstek, Primus, PrintCafe Software, QSC AG, Qualcomm, Quantum, QuickLogic, Quovadx, Radcom, RadView, Rainbow Technologies, Raindance Comms, Ramtron, Reptron Electronics, Resonate, Roxio, RSA Security, RWD, Sapient, SciQuest, SeeBeyond, Selectica, SGI, Sierra Wireless, Signal Technology, Silicom, Silicon Image, Sirenza Microdevices, Smith Micro Software, Socket Comms, SonicWALL, SoundView Technology, SpeechWorks International, Stamps.com, Stratex Networks, Superconductor Technologies, Synplicity, Syntellect, Tanning Technology, Technitrol, Telaxis Comms, Telefonica, Tellium, Telular, Terra Lycos, Trident Microsystems, Tripath Technology, TriQuint Semiconductor, Tut Systems, Tvia, Ultimate Software, Vasco, Vastera, VeriSign, Vicinity, Vicor, Vignette, Vitria, Vixel, VocalTec, WatchGuard Technologies, WebMethods, WJ Comms and ZixIt.

Other financial news included share buy-back announcements from C&D Technologies, Convergys, Datastream Systems, Lexmark, Liberate Technologies, Keane, Microtune, Novadigm, Numerical Technologies, PacificNet, Sirenza Microdevices, SoundView Technology, Trend Micro and Vitria.

There was also profit warnings from Alcatel, AsiaInfo, BellSouth, BMC Software, Business Objects, Cap Gemini Ernst & Young, Computer Associates, Dassault Systemes, Dendrite, Digitas, ESS Technology, GFT Technologies AG, Marconi, NCR, Nortel Networks, Parity Group Plc., Qualcomm, Roxio, Siemens, TeleTech and Telus; and share split announcements from InfoSpace (reverse), Palm (reverse) and Vyyo (reverse).

Additionally, AOL Time Warner has disclosed that the SEC had opened an inquiry into its accounting practices; Izodia has closed its doors; and Callahan GmbH, the German cable company, partially owned by Deutsche Telekom, has filed for insolvency, as has French desktop systems management tools company Swan SA.

Locally

Aqua Online (+20%)
Cape Empowerment Trust (+50%)
Casey (+66.7%)
Crux (+33.3%)
Datatec (-20.8%)
Elexir (-33.3%)
FrontRange (+25%)
Idion (-20%)
Maxtec (+83.3%)
Pinnacle (+25%)

Internationally

Atmel (-41.2%)
Avaya (-59%)
Digital Lightwave (-47.4%)
Elcom International (-40%)
Frontline Comms (+100%)
InterVoice-Brite (+75%)
NCD (-41.2%)
PCD (+50.8%)
Qwest Comms (-39.8%)
Sprint (-41%)

The Fortune magazine global 500 listing has been published, with technology companies, generally, not covering themselves with honour. Overall, the highest IT/telecoms names were NT&T at number 15, IBM at 19 and Verizon Comms at 26, although conglomerates such as Mitsubishi, Mitsui and Siemens were also in the top 25.

Unfortunately, the top three money-losers were all technology companies in the form of Nortel Networks, Vodafone and Lucent. On the positive side, the highest rated technology company in the increase in revenue listing was Vodafone at 24; in the highest profits, it was IBM at number eight; in the biggest increase in profits, it was LG Electronics at 14; in the highest returns on revenue, it was Microsoft at number one; in the highest return on assets, it was Oracle at number one; and in the biggest employers category, it was China Telecomms at number six.