2015: Tough for SA's ICT, buoyant elsewhere
It has been a tough year for the ICT industry with overall worldwide ICT spending down as a result of the strong US dollar and some immense fluctuations on the key stock markets.
There is no doubt that 2015 was a tough year for the ICT industry with overall worldwide ICT spending down as a result of the strong US dollar and some immense fluctuations on the key stock markets. All-time or 15-year highs were reached on the 'western' and 'eastern' markets respectively earlier this year, but were followed by significant changes that saw many of the indices drop below the levels prevailing at the start of the year and indications are that some indices may not show any growth in 2015.
Nevertheless, there were many new start-ups; a significant number of IPOs; heavy private equity activity; and, a feverish merger/acquisition scene. However, the dramatic demise and de-listings of ICT companies in the local market continues to be a major cause for concern going forward, despite many more conglomerates now having a significant and growing ICT portfolio.
From a business perspective, the drive for efficiency and productivity still remains a high priority with the areas of BI/analytics; disaster recovery and business continuity; governance; and, security, especially cyber security, still key for many organisations.
From a technology perspective, the increasingly rapid move to a digital world and the emergence of the "Internet of Things' heads-up the list of opportunities going forward.
In addition, China is becoming increasingly involved in M&A and investment activities globally; significant consolidation is on-going, particularly in the semiconductor and telecommunications/communications fields; and, many of the 'big' boys are streamlining their operations and either splitting-off, listing or selling-off non-strategic elements of their businesses.
The local scene
This year has been a 'bad' one for ICT listed companies as there have been no new listings but several de-listings/suspensions:
* Business Connexion, which was acquired by Telkom SA;
* CompuClearing, was acquired by Australia's WiseTech Global;
* Digicore, which was acquired by Novatel Wireless;
* Gijima (privatised);
* Morvest Group (privatised by investment company).
In addition, ConvergeNet Holdings moved to the investment sector of the JSE as Stella Capital Partners; Poynting Holdings became Alaris Holdings; MB Technologies became Tarsus Technology Group (although still not listed); and, Sekunjalo Investments became AEEI.
However, on a more positive note, there were a number of new entrants and new companies launched into the local market, although some indirectly, including Apple (again); Facebook; GK Software; and Newland ID. In addition, M-FiTEC, the financial technology investment holding group, was listed as was MTN Zakhele, MTN's BEE initiative.
As usual, there was much merger/acquisition and investment activity in the local market that included:
* Adapt IT buying CQS Investments and Student Management Software Solutions;
* CyberLogic merging with Space Age Technologies;
* Datatec making three overseas deals;
* Dimension Data buying the remainder of Britehouse;
* EOH acquiring Construction Computer and Mehleketo;
* First Technologies merging with Kaizen IT Solutions;
* Itec becoming totally SA-owned;
* Stella Capital partners becoming the major shareholder of Tellumat.
* Altron closing its Autopage subsidiary and selling-off its stakes in Aberdare Cables and Aberdare International;
* Dell SA making a BEE equity equivalence deal;
* Mxit closing down;
* Naspers investing $1,2bn in Avito (Russia);
* OpenText doing a BEE deal;
* Pinnacle making a buy-out offer for Datacentrix;
* the PIC taking the Government's Vodacom 13,9% stake;
* Redstor (UK) buying Attix5;
* Alan Knott-Craig Jr launching HeroTel, a new WISP.
Also announced was Blue Label Telecom's proposed restructuring of the company's capital that would see them pay $4bn for approximately 35% of Cell C's share capital.
Key appointments during the year included new Country Managers/General Managers/CEOs/MDs at many companies including Alaris Holdings, Amecor, Britehouse, Cisco, Hisense, HP, Huawei Technologies, IBM, Liquid Telecom, MicroStrategy, MTN Group, MTN SA, Oracle, Pinnacle, Project Isizwe, Riverbed, SABC, SAPO, Sentech and SITA; whilst Sunil Joshi, the CEO of Neotel, Alan Knott-Craig, CEO of Project Isizwe, Sifiso Dabangwa, CEO of MTN, and Rob Abraham & Craig Venter of Altron were amongst the key resignations/retirements.
The dramatic demise and de-listings of ICT companies in the local market continues to be a major cause for concern going forward, despite many more conglomerates now having a significant and growing ICT portfolio.
From an awards viewpoint the major 'winners' included Niel Schoeman, founder and CEO of Vumatel, as the IITPSA's IT Personality of the Year for 2015 and Peter du Plooy, CIO of Engen Petroleum, as the Visionary.
The African scene
The African scene was again dominated by the telecommunications industry and in particular the many new mobile initiatives that have been launched, including mobile banking capabilities and further LTE deployments; and, the sell-off by telecommunications companies of their tower infrastructure to entities such as American Tower, Eton Towers and IHS Towers. However, the NTN1trn ($5,2bn) fine imposed by the Nigerian authorities on MTN overshadowed all other activities of the year.
As the African market continues to mature, the emergence of potential regional hubs continues apace, with Kenya emerging as the centre for East Africa and a duel between Ghana and Nigeria for West Africa; whilst North Africa continues to fall under the Middle East/Egypt. As previously, there are still no IT companies listed in the current 'Top 500 Companies in Africa' list from outside SA and still only a handful of telecommunications companies included.
However, ICT activity on the continent continues to grow with many new offices being established by companies such as Agilitude, Google, Hisense and Juniper Networks.
Other activities in Africa included:
* Apple taking over HopStop.com;
* EOH buying Twenty Third Century Systems;
* NITEL being sold to a NATCOM consortium (at last!);
* Millicom buying Zanzibar Telecom;
* MTN Group restructuring its African operations;
* MTN Rwandacell listing in Rwanda;
* the Tanzanian government taking a stake in Tanzanian Telecoms;
* the Zimbabwean government taking over Telecel.
In addition, many new regional/African appointments were made during the year from companies such as Acer, AMD, Avaya, Dimension Data, EMC, Helios Towers Africa, Lenovo, MultiChoice Africa, NetApp, SAP, Seacom, Sophos and VMware; as well as at many of the telecommunications companies run by such entities as Bharti Airtel, MTN, Orange and Vodafone/Vodacom.
The International scene
This year has again epitomised a healthy, thriving and growing ICT industry with significant consolidations in many sectors, although the most significant happenings were the $67bn acquisition by Dell of EMC, which is still underway; and, the take-over of Time Warner Cable by Charter Communications in a deal worth $56,7bn.
Eight of the top ICT companies have each been involved with at least four or five acquisitions/major investments. These companies were Accenture, Apple, Cisco, Google, IBM, Intel, Microsoft and Twitter.
In addition, there were several other significant deals including:
* Activision Blizzard buying-out King Digital Entertainment for $5,9bn;
* Altice buying out Vivendi's stake in Numericable(EUR3,9bn),
* Cablevision Systems ($17,7bn) and Suddenlink ($6,4bn);
* Avago buying Broadcom for $37bn;
* Capgemini buying iGate for $4bn);
* The Carlyle Group buying the Veritas unit of Symantec for $8bn;
* Diebold acquiring Wincor Nixdorf for EUR1,57bn;
* FIS acquiring SunGard Data Systems for $9,1bn;
* HP buying Aruba Networks for $3bn;
* Hutchison Whampoa taking out O2 for $15,4bn;
* Intel acquiring Altera for $16,7bn;
* Lam Research buying KLA-Tencor for $10,6bn;
* Lexmark purchasing Kofax; Liberty Global taking Cable & Wireless Communications for $3,5bn;
* Microsemi buying-out PMC-Sierra for $2,3bn;
* Nokia acquiring Alcatel-Lucent for EUR15,6bn;
* NXP Semiconductor buying Freescale Semiconductor for $11,8bn;
* ON Semiconductor taking over Fairchild Semiconductor for $2,4bn;
* Raytheon buying-out Websense from its private equity owner;
* Trend Micro buying HP's TippingPoint;
* Verizon Communications taking over AOL for $4,4bn;
* Western Digital acquiring SanDisk for $19bn.
Other major international activities included the split by CSC into two units; the strategic partnership created between Ericsson and Cisco; the split by HP into two companies; the floating of PayPal by eBay and the disposal of its enterprise business; the privatisation of Informatica; the launch by Microsoft of Windows 10; and Google creating Alphabet, a holding company for its many subsidiaries. On the downside, RadioShack applied for Chapter 11 protection.
However, there were an unprecedented number of IPO's during the year, including the listing of Box; First Data; Fitbit; GoDaddy; Legend Holdings, the parent of Lenovo; Mimecast; Pure Storage; SnapChat; Square; and, Sophos.
Major international appointments included new CEOs at 3D Systems, Alibaba, Alphabet, Atmel, AVX, Cisco, Citrix Systems, Dish Networks, Exar, F5 Networks, Google, Groupon, HP, HPE, HTC, Millicom, Novatel Wireless, NTT Communications, Splunk, Twitter and Zynga; key resignations included John Chambers, CEO of Cisco; Michael Combes, CEO of Alcatel-Lucent, Dick Costolo, CEO of Twitter and Paul Maritz, CEO of Pivotal (part of EMC); and, unfortunately, the deaths of Gene Amdahl, the founder of Amdahl, one of the key mainframe companies of the IT industry, Dave Goldberg, CEO of SurveyMonkey, Satoru Iwata, CEO of Nintendo, Matti Makkonen, known as the 'father' of the SMS, Ralph Roberts the founder of Comcast; and Klaus Tschara, co-founder of SAP.
In top postion
During the year, Lenovo hung on as the #1 PC company; HP as the #1 server company; whilst Samsung remains the #1 ICT company by revenue followed by Apple, Hon Hai Precision Industry, AT&T and Verizon Communications.
In addition, the annual re-ranking of The NASDAQ-100 Index, composed of the 100 largest non-financial stocks listed on The NASDAQ Stock Market(R) was announced and from a technology viewpoint showed Expedia, Maxim Integrated Products and T-Mobile US joining the index and Garmin and VimpelCom leaving the index.
2016 and beyond?
The international scene next year looks to be another exciting one with continued consolidations particularly within the semiconductor and telecommunications industries. Also, many of the smaller players in the cyber security space are likely to be acquired.
In addition, don't be surprised at the demise or acquisition of some global names including Box, Dropbox, Fitbit, GoPro, NCR, Netflix and Twitter; the outcome of Yahoo's restructuring/break-up; IPOs from many companies currently controlled by private equity firms, such as Blue Coat Systems; and, the continued pillage of the Israeli technology sector.
There are still no IT companies listed in the current 'Top 500 Companies in Africa' list from outside SA and still only a handful of telecommunications companies included.
In Africa, expect further developments re the establishments of regional hubs; more offices being opened on the continent by the 'big boys' as well as SA companies; and the listing of Botswana Telecommunications.
Locally, the heavy focus will be on further rationalisation of the telecommunications sector including the future of Cell C following Blue Label's investment and other restructuring; the Huge Group, which is trading under a cautionary; and, resolution of the proposed Vodacom/Neotel deal. In addition look out for the possible de-listings of Datacentrix and TCS; and the further expansion of ICT interests by many of the conglomerates.
The ICT industry is very much alive and kicking despite negative growth this year and only a slight improvement expected in 2016. There are bound to be some shocks as nothing is sacred in the ICT industry, so don't be surprised at what may happen nor take anything for granted.