Wrapping up 2001

It has been a momentous year, with the impact of the events of 11 September adding significantly to the difficulties with which the IT and telecommunications industries have battled throughout the last few months in particular.

[VIDEO]We have also witnessed an accelerated convergence between these two industries that will continue well into 2002 and beyond, and the impact of many activities, which in the days of old would have been of little consequence, that are now having a ripple effect globally at an ever-increasing rate.

The local IT market, which has grown this year by some 10%, has again been dominated by the happenings associated with Dimension Data, much of it being of a negative nature. Recently released financial year-end results showed an enormous loss, and earlier in the year the share price tumbled dramatically causing it to lose its place in the FTSE 100 listing. Additionally, a number of acquisitions were undertaken, the largest of which was for Proxicom, after a protracted battle with Compaq; a reorganisation was undertaken; and locally, the terms of the recent lay-offs are being contested by a group of unhappy ex-employees.

The local telecommunications market was dominated by the wrangles over the third cellular licence, which finally saw Cell C winning and subsequently coming on stream; and the amendments to the Telecommunications Bill, with respect to the second national operator (SNO). The bidding for the SNO licence should start shortly. Additionally, the IPO for Telkom was delayed until 2002.

Global economies, and specifically the IT/telecommunications industries, are in a recession worsened by the events of 11 September, and only a brave person would suggest that we will emerge from this cycle by the end of 2002.

Paul Booth, MD, Global Research Partners

The international IT market, which was severely battered this year, was once again dominated by the happenings involving Microsoft. The year started with Microsoft settling its Java dispute with Sun Microsystems, but the focus then moved rapidly to the on-going anti-trust litigation during which Microsoft was found guilty. We are still awaiting the finalisation of the penalties in this case, both in the US and Europe, with the latter not expected to be resolved until well into 2002.

The international telecommunications market for 2001 belonged to the "big boys" such as AT&T, British Telecom, Deutsche Telekom and Vodafone. Restructuring, the selling-off of non-core assets and the abandonment of many projects dominated their activities, which were heavily focused on reducing their debt.

As in 2000, there was a heavy focus on e-commerce this year, but the flavour has been oriented much more towards the integration of e-commerce with mobile/wireless technology including Bluetooth, a trend that will continue well into 2002 and beyond. Additionally, the quiet onward march of Linux has continued with even Microsoft now acknowledging that it has become a threat.

As was the case in 2000, and as was predicted in my column this time last year, there have been very few new listings on the JSE and many, many casualties, through a combination of liquidations, consolidations, acquisitions and conventional delistings.

The share prices of the local technology stocks have remained at a very low level. An analysis at the end of November suggested that of the 80+ technology shares still listed, some 22% were trading below 10c, another 29% at below 50c, another 13% below R1, and only 25% trading above R2, with the vast majority of their values still at below the original listing levels.

The new listings have been those of BTG (ex-USKO plus bits of Fintech), Dynamic Cables (partly a restructured Conlog) and Edutech (reverse take-over of Contlan). However, the long "death list" includes Accord Technologies (liquidated), Aries (delisted), Bynx Software (delisted following buy-out from UK company), CCH (acquired by MGX), Conlog (restructured and relisted as Dynamic Cables), Core Holdings (suspension but expected liquidation shortly), Contlan (reverse take-over), Fintech (part going into USKO/BTG and the rest being absorbed into Altron), I-Tech (suspension), Igaming (suspension), LogicalOptions (delisted), Metropolis (delisted), MMW (liquidated), M-Web (delisted), Omega Alpha (liquidated), Oxbridge (suspension), Paradigm (liquidation), PTH (liquidation), Seartec (delisted), SecureData (delisted), Sempres International (liquidation) Siltek (liquidation), Smacsoft (acquired by overseas company and delisted), Streamworks (acquired by DNA Supply Chain), Top Tech (liquidation), TranZact (unlisted) and ValueCom (delisted).

Other major acquisitions/mergers/investments include those of CCH and EC-Hold by MGX; I-Fusion by Bidvest; and Getronics SA and ICL Africa`s Infrastructure Services business by CS Holdings. Furthermore, Dimension Data and Prism, in particular, were each involved in several acquisitions during the year.

Key appointments during the year included those of Leslie Boyd as chairman of Datatec, Dana Buys as CEO of Ixchange, Brett Casey as CEO of Elexir, Harry Coetzee as group MD of IST Group, Dereck Daymond as MD (Asia and MEA) of Ascential Software, Paul Edwards as CEO of M-Cell, Thorston Freitag as MD of Sub-Saharan Africa for Cisco SA, Robin Morello as MD of Oracle SA, Zeth Malele as CEO of arivia.kom, Paul Mather as MD of Activ8, and Rick Rogers as SA country manager.

We saw the resignations of Ivan Ferrer, founder of Pastel, Lenore Kerrigan as MD of Oracle SA, Derek Krunen as CEO of Ixchange, Dave Lello as MD of Siltek, Roux Marnitz as chairman of Comparex, and Sas du Toit as chairman of Spicer.

In February, Alan Knott-Craig was recognised by the GSM Association as being one of the world`s most distinguished contributors to the development of the cellular industry worldwide.

New South African offices were opened by Ascential Software, Brokat Technologies, Business Objects, Tally and Wave Technologies; while Lucent Technologies and PeopleSoft withdrew their local direct presence.

Other significant local happenings included the creation of arivia.kom from the IT elements of TransNet and Eskom together with Ariel Technologies; the establishment and launch of Cell C; the closure of PeopleSoft SA and the move of the distributorship to ERP.com via its subsidiary Activ8; the name change of PQ Africa to Comparex Africa; the take-over of Venture Computer by Lexmark International; the investment by NEC into Packard Bell South Africa to create NEC Computers International SA; the R80 million investment in Rubico by an overseas consortium; the unbundling of Johnnic; Absa`s abortive attempt to sustain a free e-mail/Internet service; the MBOs resulting from the liquidation of Siltek; the merger of Computicket and TicketWeb; the merger of Siemens Business Services and Unihold`s IT Business Solutions; and Nedcor`s investment in Net1 Applied Technology.

On the media front, we saw ITWeb launch its first print publication, Brainstorm.

Mbusiness (Systems Publishers), Mobile & Wireless Talk (Johnnic), Mobile and IT News, and Windows User Magazine were also introduced.

However, Communications News, Interactive Week, PC Magazine SA and What SA ceased publication.

Computerweek became a monthly publication, leaving Computing SA as the only "trade" print publication that appears more frequently than monthly.

The international market was dominated by continuing job loss and profit warning announcements, with even many of the very large players experiencing significantly reduced profit and revenue levels, and in many cases suffering unprecedented losses.

Of the 1 000+ companies that I track on a regular basis, the vast majority fell into above categories. Also, unlike the previous eight or nine years, there were very few new IPOs, and several that were planned were not only delayed but withdrawn totally.

From an acquisition perspective, we saw many that were in the $1 billion-plus category. The significant ones included those of AT&T/TeleCorp, Cambridge Technology Partners/Novell; Celestica/Omni Industries, GlobalSpan/Virata, HP/Indigo, IBM/Informix, Intel/Xircom; Maxim/Dallas Semiconductor; Microsoft/Great Plains Software; Peregrine Systems/Remedy, Samina/SCI Systems; SAP/TopTier and a major investment in Commerce One; Schumberger/Sema Group and part of Groupe Bull; Singapore Telecom/C&W Optus; Solectron/C-MAC, Valentia Comms/Eircom and Vodafone/Eircell.

Hewlett-Packard is in the throes of fighting for control of Compaq, which is unlikely to be finalised for several months. Should this deal be concluded, it will be the largest ever IT deal.

Major international appointments included those of Rick Belluzzo as president and COO of Microsoft, Jack Messman as CEO of Novell, Anne Mulcahy as CEO of Xerox, Richard Roscitt as chairman and CEO of ADC, and Ted Waitt as CEO of Gateway.

Resignations included those of Sir Peter Bonfield as CEO of British Telecom, Ellen Hancock as CEO of Exodus Comms, James Kinsella as CEO of Tiscali, Tim Koogle as CEO of Yahoo, Eric Schmidt as CEO and subsequently chairman of Novell, and Jeff Weitzen as CEO of Gateway.

John Roth, CEO of Nortel Networks, and Allen Yurko, CEO of Invensys, retired and Gerald Levine, CEO of AOL Time Warner, announced his retirement as from 30 April 2002.

Other major international events included the boardroom battle at Computer Associates; the IPO from Accenture; the closure/liquidation/Chapter11 filings from (among many others) Brokat Technologies, Comdisco, Concert (the AT&T and BT JV), Convergent Comms, Covad Comms Group, CyberCash, Digital Broadband Comms, ExciteAtHome, Exodus Comms, Komag, Lernout & Haupsie, MarchFirst, NorthPoint Comms, Polaroid, PSINet, QSP Group, Quad Systems, SSE Telecom, Star Telecomms, Teligent, US Interactive, US Wireless, Winstar and Xpedior; the sell-offs/break-ups by AT&T, British Telecom, Lucent and Marconi; and the name change of Seagate Software to Crystal Decisions.

On the local scene, the clean-out of technology stocks will continue with, I suspect, at least 10 more casualties during the year, with few new listings other than that of Telkom.

Internationally, I fear for the fate of many companies, specifically Ariba, Commerce One, Geac Computers, NCR, Unisys and Xerox. Additionally, I wouldn`t be surprised to see the merger of Handspring and Palm and the latter`s support in its PDAs of the Microsoft CE operating system.

In terms of technology trends outside those already mentioned, I expect major advances/exploitation of ASPs, business intelligence tools, encryption, middleware, mobile Internet browsing, smart card technologies and voice recognition software, together with a growing adoption of local GPRS cellular capabilities. Additionally, the shortage of good middle management and specific ICT skills will continue to be a major headache.

Generally, global economies, and specifically the IT/telecommunications industries, are in a recession worsened by the events of 11 September, and only a brave person would suggest that we will emerge from this cycle by the end of 2002. However, as Gartner has said on many occasions, organisations shouldn`t let up on technology spend/exploitation at this time, as the strategic impact of doing so could have a significant negative impact in the years to come.