| Holway's HotViews Achive for Jan 07 | Home |
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31st Jan 07 Torex comment The
comments in the press today about the Torex affair are very interesting. |
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30th Jan 07 Torex subject to SFO investigation The
SFO have just (3.30pm) announced that it, and the London Police, have
launched an investigation into Torex Retail (see 27th Jan 07) below. But let's not find people guilty at this stage. But you would think our industry might have learned by now. I don't want to be "holier than thou" but, as an NED, revenue recognisition is something I have been very strict on. The risks are just never worth it. Note- I've updated the story 27th Jan (below) as Moore is still Non exec Chairman. He just gave up his CEO role. Can't be an easy Chair at the moment. Would anyone like the vacant jobs as FD or NED @ Torex right now? Probably stand a high chance of getting the job if you apply! |
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29th Jan 07 Holway joins Finsbury Technology Trust as NED I attended my first board meeting at Finsbury Technology Trust (FTT) today and was appointed as a non exec director. Chairman is David Quysner (of Abingwoth) who, I must admit, I really rate. RNS announcement issued to the LSE late this afternoon. FTT is one of the very few global technology trusts investing only in quoted companies. I don't think I am breaking any rules if I say that the fund has not performed that well of late. So it's an interesting role at an interesting time. Indeed something I could not have done whilst at Ovum. Anyway, it should keep me well informed as well as busy. Mind you, my diary seems to be fuller post-Ovum than before! Something I did not think possible! |
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28th Jan 07 Microsoft
doesn't do "style" Anyone
interested in Microsoft, and in particular its UK operations, should read
Andrew Davidson’s Interview with Gordon Fraser in today’s Sunday
Times. Click
here. Must
admit the interview hardly fills me with confidence. Fraser seems a
lightweight for such an important role. In today’s “lean and mean”
flat reporting structures, he also seems strangely remote. “I
report to the president of Microsoft International, who reports to the
chief operating officer, who reports to the global chief executive,” Mitchell
said. Well, that looks a long way from being able to have any influence at
all on Microsoft’s future direction. And
that’s important. “Is
Microsoft becoming a consumer-electronics company?”
Davidson asked “No, we’re still a software company at heart. Xbox and Zune are
founded round the software inside, and hardware is not a profit-generating
business for us; they are a means to a software business.” As
readers will know, I used Microsoft in my “Who are you” speech for the
Prince’s Trust at the V&A in Dec 06. I said that Microsoft’s dna
was being an ISV. Whether that's in the enterprise or productivity aids
and operating systems for consumers. But it is not a hardware developer
and certainly not as a rival to the iPod or anything else in the consumer
electronics space. Microsoft, in my view, just don’t get it in that
space. To succeed here nowadays you need style. And Microsoft has
never done “style”. This
week Vista launches in the UK. The advice I get from everyone is STAY
CLEAR and certainly don’t even think of upgrading a PC from XP to Vista.
I guess if you buy a new PC with it ready installed you will have to use
it. But PCs basically don’t go wrong anymore (provided you don’t
upgrade the operating system!) and last forever nowadays. Anyway the
features I really wanted from Vista (like desktop search, news feeds etc)
I got for free from Google. And all the photo and video editing stuff is
much better on the iMac anyway…even better than Vista. Microsoft
are unlikely to be making too much extra cash from the Holway account this
year. |
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28th Jan 07 Feedback
and Autonomy I
only started this “Blog” very recently and it was totally for my own
“amusement”. Well, to be blunt, I actually enjoy commenting on our
industry and, as I have done it everyday since 1986, it came as a bit of a
blow to find that, post Ovum, I had no medium anymore. Anyway,
as I’m off for a long awaited holiday to India for three weeks from the
end of this week, the last thing I wanted was any readers. That way I
would feel I had to work on my holidays as I have done in every one of the
last twenty years! But,
clearly I do have readers. Just
had an email from Mike Lynch @ Autonomy saying some really nice things
about my piece on Friday. But, also pointing out that the Nov 00 £32
price was hardly a London IPO. Autonomy had gone onto EASDAQ (remember
that?) in 1998 at 38p. They then transferred to NASDAQ and by the time the
listing hit London it was £32! Anyway,
that’s another thing in my life that clearly hasn't changed…having to
point out “mistakes” I have made! |
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28th Jan 07 Dan
Wagner The
very worst period of my life as an analyst was in early 2000. I had
written a piece about Dan Wagner (of MAID, Dialog and Bright Stations) who
had bought the rights to the Boo.com software from the receivers. I
won’t repeat my comments here for obvious reasons! The
next I heard was a letter from Mischon de Reya (Princess Diana’s
solicitors you may recall) accusing me of defamation of character. Wagner
clearly wanted his day in court and, having loads of money, had the means
to do so. I
did not. It
was a very worrying period for both me and my wife as I could have lost a
considerable amount. In the end I made a public apology and a donation to
charity. Never really felt “at ease” over that I must admit! But it
was pragmatic at least. So
every time Wagner’s name appears in the papers, I sort of wince. Wagner
has now raised $100m to setup his own VC boutique (Bright Station
Ventures) and has made its first investment in Shiny Media which,
according to the Sunday Times today Click
Here,
“claims to be Europe’s largest publisher of blogs” The
article ends with a quote from George Coelho of Benchmark saying “Dan is a great entrepreneur. This country needs more of them”. |
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27th Jan 07 Torex
Retail - Another sorry tale On
Friday, Torex Retail shares were suspended as it issued a profits warning
and was deep in discussion with its bankers. For The Times report Click
here. Only eight days earlier, Torex had issued an upbeat trading
statement. The problems seem to stem, yet again, from the declaration of
contracts wins which just did not materialise; at least in the time frame
expected. I would point out that a pretty similar situation led to charges
being brought against both the CEO and FD of AIT resulting in them both
serving significant jail sentences. The
Torex story does has some interesting twists and characters. iSoft and
Torex merged in 2003. Chris Moore from Torex became CEO of the combined
operation but “left without compensation” together with his FD in
2004. The problems which have since been discovered with the revenue
reporting at iSoft are well known to readers. They relate to the period
FY03-FY05. As a result, both
Chris Moore and the FD, Mark Woodbridge, are currently among iSoft
directors who served at that time who are subject to both an FSA and Accountancy
Investigation and Discipline Board (AIDB) investigation. We suspect
th In
2004, however, Chris Moore became Chairman and CEO of the now demerged
Torex Retail. He stepped down as CEO of the Torex only a few months ago. He was replaced by Neil Mitchell. The story twists still further as we
understand that Mitchell was a consultant to Enron. All
this does nothing to enhance the reputation of our sector, AIM, Evolution
(Torex’s broker) and BDO Stoy Hayward (their auditors). Revenue recognition has
been the bane of our industry for decades. It nearly brought Oracle to its
knees in 1990 and we can list a whole range of IT companies – both big
and small – who have been affected since. IFRS was meant to
“standardise” this area. But, again as I have said on many occasions,
it has not really improved the situation at all. Unscrupulous boards can
do what they want and get it through most auditors. And it matters. Real people lose real money. But now, at least, real people sometimes go to real jails as a result. Well that’s if there are any cells left to house them. |
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26th
Jan 07 Autonomy We often bemoan the absence of any "international" UK-owned/based software companies. Although Sage is clearly in that catagory, it does have different software in each of its geographies resulting from the consistent acquisition policy it has implemented over many years. That's what makes Autonomy "different". Its "corporate search" software is now used by corporations globally. Indeed the pressure to keep tabs on e-mails (something that No 10 might have heeded!) has fuelled growth. Yesterday, Autonomy announced some pretty impressive figures (Revenues up c160% at $251m and gross margins of 91%. PBT increased from $12.6m to $56.3m) Of course, the acquisition of Verity contributed handsomely to this. But it also means that 60% of revenues now come from the US. This is almost unprecedented for a UK software company. Autonomy IPOed in Nov 00 at 3276p and rose to a high of 4150p. But by 2003 they had "crashed" to 90p and were being cited as one of the worst causalities of the "dot.com crash". But what a buying opportunity this created! Shares are currently six-times higher at 573p. Indeed they are up nearly 50% since 1st Jan 06 alone. Sure, at a forward P/E of 33 they are not cheap anymore. But it would be hard to think of another UK software company which had such high upside potential. Good article on Mike Lynch and Autonomy in today's FT Click here |
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26th
Jan 07 NHS IT, BT and Public Sector "IT disasters" Yesterday I attended a briefing from Patrick O'Connell - MD of BT Health. Patrick gave a very upbeat assessment of BT's progress on the various parts of the programme in which BT are involved:
I asked a question about how "attitudes" could be changed towards the project. Patrick gave perhaps his most animated response. He talked about his long experience on "complex" projects both as a user (fighter pilot!) and procurer/project manager. He said that the comments were "typical of this stage of any major transformational programme". Public perception always lagged. He gave as an example the Hubble telescope which, if you remember , was a major "disaster" at first with a Space Shuttle mission being required to fix it with a new "contact lens" before it could do its job. Now everyone had forgotten that and it was hailed as major triumph. Patrick thought that was how the public would perceive the NHS IT programme in a few years. Basically, I agree with this. Indeed it was the major argument behind my much publicised article on the subject in 2006. Click here. The theme was taken up in an interview with Pat McFadden (Minister for e-government) in the FT on 23rd Jan 07. It is well worth reading. Click here. Patrick also (rather rashly in my view!) said that BT Health wanted to expand and exploit what it had learned in the UK in Europe and Canada. I pointed out to Patrick that BT Global services had a unique capability in the UK which just did not exist outside the UK. I think BT should think long and hard before embarking down that road. When asked about profitability Patrick said "BT will make a profit from its Health activities...at the end of the day". The only question now is when that day will come! |
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24th
Jan 07 My
bet is on General Atlantic to buy Isoft The papers have had
a heyday speculating on who will be the successful bidder for iSoft. The
Times and others have suggested Cerner as a contender. But, as Cerner
already supply their IDX software to the BT LSPs, that is really not on.
It would mean Cerner became a monopoly supplier which is against all the
“rules” setup for the NHS IT project. McKesson is also
mentioned as are Siemens. But my money would be on General Atlantic. GA
already own the US operations of healthcare software company Eclipsys.
ISoft bought Eclipsys’ UK operations in 2002. General Atlantic is
already an iSost shareholder. GA already have significant presence in the
UK S/ITS market with their investments in Liberata and XChanging. They
also own a stake in Northgate. I also reckon that
an iSoft owned by GA would pose little problem with CSC who have a
“right of veto” over the ownership of iSoft. |
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21st
Jan 07 Boring Capita It's pretty hard to hide the fact that I was a great fan of Capita from the very start. Covered them in SYSTEMHOUSE since before the 1989 IPO and, of course, famously awarded them my Boring Award for 10 years of uninterrupted earnings growth. In fact Capita has NEVER had a earnings reversal. Sage is the only other UK quoted SITS company with such an unblemished record. But Capita is the out-and-out winner with its 200x gain for shareholders since that 1989 IPO. I've also been a great fan of BOTH Ch Rod Aldridge and CEO Paul Pindar. Both a fan and I hope a friend. I was certainly the only analyst invited to their 20th Birthday Bash at the Dorcester a few years back. I was appalled at the treatment that the press meted out to Rod over the loans scandal. I have absolutely no truck with what went on and think that Rod was either misguided or naive in lending that £1m to the Labour Party. But Rod's achievements are legion and his contributions to, for example, the Prince's Trust are largely unsung. He did not deserve to end this part of his long career with a big black mark against a superb career when he stepped down. At the time Rod told me that he had notified the Board that he would step down at the July AGM, but thought it best to go sooner when the row erupted. The interview in today's Sunday Times with CEO Paul Pindar puts a slightly different spin on this story. "Did Aldridge want to resign? Pindar hesitates. “Collectively he was persuaded it was the right thing to do.” It cannot have been easy, given how far back the two go" the interview reports. See the whole interview at click here. It is a really good read and provides some insights into Paul who, afterall, now runs the largest and most successful SITS company in the UK. I expect Capita's results next week to continue its "Boring" record! |
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16th
Jan 07 Geoff Unwin steps down from the Chair at UBM Geoff Unwin has announced that he will step down as Chairman of UBM at the end of 2007. He has been Chairman since 2002 and a director since 1996. Geoff and I first met when we attended the same induction course on joining Hoskyns in 1968. Geoff then on to become the MD and the CEO of Capgemini. I didn't do quite so well but did make it to Group Marketing Director under Geoff in the 1980s before I left and formed my own analysis company in 1986. Geoff is a very rare breed of IT directors. Firstly he had a marketing background (at Cadbury's) before he went into IT. Secondly, he actually became the head of a French SITS operation. It's practically unknown for any Brit to make it to the executive committee of any global SITS company - let alone a French company...which was wy I was so pleased last month when Bill Thomas made it to the Exec Committee of EDS. Finally, Geoff has managed to make it to the top in a non-SITS company (UBM). I can only think of one person (Sir Colin Southgate) who has done this before. Southgate went on from Software Sciences to head Thorn-EMI. There is a point here. I have long lamented the shortage of numerate graduates going into IT. But i also lament the shortage of really good management - particularly from marketing - that move into IT. In my view, one of the major reasons why the UK hasn't made it on the international scene is not its lack of technical expertise but its lack of marketing expertise. Great mousetraps are not good enough. But great marketing can even make "average" mousetraps sell. Returning to Geoff (now 64). He still has several other directorships. He is the Chairman of BPO specialist Liberata. We somehow feel it's not retirement time for Geoff quite yet!
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15th
Jan 07 Vertex sold to private equity United Utilities has sold its Vertex BPO operations to a group of private equity firms for £217.m. The group is led by Oak Hill Capital and includes GenNx360 and Knox Lawrence International. Given that Vertex had revenues of over £200m in the six months to 30th Sept 06, a PSR of <0.5 must have been a disappointment to UU. A price tag of twice this had both been rumored and expected. You should also put the £217m in the context of the £95m (£72m nett of cash) that Vertex paid for Marlborough Sterling in 2005 (over the top we thought at the time) and the £25m it paid for 1st Software Group in Feb 06. £100m for all the rest of Vertex? Wow, we would have expected three or more timers that as recently as a couple of years back. But this is a problem facing many newly established BPO companies - ironically particularly those setup with private equity backing - Liberata, HBS, X-Changing etc. Sure, Vertex had a particular specialisation in the call-centre end of the business which seems to have suffered more than most in valuation terms lately. But forecasts for BPO growth are still buoyant (albeit lower than the "take-over-the-world"-type forecasts of 2000) You should also compare the Vertex valuation with the "UK King of BPO" - Capita. Capita is currently valued at nearly three times revenues. |
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15th
Jan 07 Why
the pundits don’t seem to get the iPhone My
very last piece for the Holway@Ovum Hotnews service (reproduced below)
appeared on 21st Dec 06 and was all about me wanting an
iBlackberry for Xmas 2007. Apple’s
announcement of the iPhone last week at MacWorld probably created more
column inches than any other product announcement that I can remember. The
reviews were positive to the point of idolatry. The only points of
criticism seemed to be:
You
might also recall that I used Apple in my “Who are you?” speech for
Princes Trust on 14th Dec. I said that when Apple was true to
its dna it was hugely successful. When it tried to something it was not
– IN PARTICULAR trying to appeal to CORPORATEs – it failed. If
Apple are after the “corporate” Blackberry market, they will fail.
CIOs will NOT (well not yet!) buy iPods for staff and will not willingly
do so even if it is also a smart phone. They wouldn’t buy iMacs for
corporate staff either. But that particular part of the corporate market
is TINY! The
REAL market is the squillions of CONSUMERS who now rely on email at home
but TEXT when they are out on their phones. Straight emailing actually
works v well on 2G as Blackberry owners know! This market is VIRGIN
and HUGE. It is Apple’s dna. Apple should say “Sod the Corporates”
and concentrate on bringing classy mobile email to the masses! Then
we come on to the cost. All the articles say that consumers will not pay
$499 for an iPhone. BUT people have regularly paid that for iPods. I keep
hoping that my 3 yr old iPod (cost nearly £300 when new) will die so I
can buy a new one. I am certainly not alone. I would spend $499 to get
the sexiest ever IPod all on its own! So, why wouldn't I when I will also
get a "free" mobile and Blackberry (or Nokia E61 in my case)
as well? Oh yes, and a camera, GPS device and a whole range of other
features. The iPhone will, in the case of most users, provide them
with a mobile email service for the first time. And they will love the
experience - just like Black/Crackberry users do. Ultimately
I think that lots of corporate types will demand that their Blackberries
(or whatever) are replaced with iPhones and CIOs will have a
difficult decision on their hands! (as indeed will the taxman!) I
think the more interesting points are:
But
overall, I think the iPhone looks great and I am just itching to get one.
Although I’ve got a Vodafone Nokia E61 I still retain my mobile phone
and carry my iPod too. Indeed, sometimes I even add my digital camera. It’s
a lot in my pocket! By Q4 2007 I’ll be out of my current one
year Vodafone contract and my iPod will 4 yrs old…. I
will get my wish for Xmas 2007!! |
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Reproduced
from Ovum’s Hotnews 21st
Dec 06 What
I’d like for Christmas 2007 Many
readers will have attended the annual Techmark Review debates between
myself and Richard Kramer at Arete Research which were organised by
Deloitte. Unlike Arete, I’m not a “stock picker”. Indeed we at Ovum
are not regulated to give any kind of financial advice. At
the end of the debate in Jan 04, we are both asked for our stock picks for
2004 and I rather rashly (and with all the legal caveats I could muster)
suggested that I’d put my money on Apple whose share price then was $10. At
the next session in Jan 05, Kramer and I had some interesting public
repartee about this as Apple had risen to $32 by then. Was it too late to
name Apple again as a Stock Pick for 2005? We settled on Kramer buying a
lunch for the Ovum team if Apple rose still further in 2005. Apple
ended 2005 on $71 and Kramer royally entertained us! It
really seemed to be pushing my luck to suggest Apple as a Stock Pick for a
third year. But that’s what has happened with Apple now on $85. Interestingly
I note that analysts are now setting a target of $110 for Apple for 2007. I
really will leave the stock picking to others better qualified than me.
But as a life long Apple fan, I have to admit that I can see few rivals
around that are likely to knock Apple off its unrelenting growth path
right now. I see no rival to the iMac in my living room. Indeed as an
entertainment centre in the Holway household, powering our 50 inch plasma
screen where I show my photographs and videos all edited by Apple’s
iPhoto and iMovie and playing my iTunes music around the house, it always
provokes envy from our visitors – many of whom have gone right out and
bought the same setup. Next year we will see iTV being shipped which seems
to me to be the right product at exactly the right time. I don’t see
Microsoft’s Zune being even making a dent in the iPod market. Apple
reports continued growth in iTune downloads and the video part of this is
only in its infancy. Personally
what I’d really like for Christmas 2007 is an Apple iBlackberry. I might
then get my ultimate Martini Moment; doing everything I can do with my
Apple setup at home “Anywhere and Anytime” |
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