Our emphasis, here at TechMarketView LLP, is on the UK and how developments and trends in technology affect players (of whatever origin) in the UK market. But we are still interested in the global scene too. And that's where our partner, PAC, comes in. PAC has just released its global forecast by vertical and makes the following comments.

Manufacturing
The economic crisis impacted the manufacturing sector most severely across the globe, particularly in the automotive, mechanical engineering, chemicals and metal sectors, while pharmaceuticals, food and aerospace & defense proved more resilient. For manufacturing companies, the focus in 2010 will clearly remain on short-term savings through consolidation and standardization of both assets and contracts and particularly on outsourcing contracts.

The recovery will not happen until the second half of this year and will be driven by investment in embedded systems, PLM - including integration with PDM, ERP and CRM - collaboration, MRO and CRM supporting after-sales services.

Banking
The situation in banking will remain highly differentiated from country-to-country, depending on the level of government aid and the structure of the industry, such as the importance of investment banking, private banking and semi-public saving banks. Banks will have several major issues to solve in 2010, with compliance continuing to generate the bulk of IT investments. Other issues include customer loyalty, post-merger integration, STP/ industrialization, data consolidation and processing, and these issues can only be solved through IT.

Insurance
Insurance companies are in a slightly better situation, as revenues (premiums) are quite stable. 2010 investments topics include multi-channel integration, CRM, web-based, front-end and legacy modernization.

Public Sector
The public sector has been very resilient in most countries in 2009 as federal investment programs have supported demand; however municipalities and regional governments face decreasing tax income and most countries’ debt level will be a heavy burden for the years to come. PAC expects a progressive slowdown of growth in spending despite the implementation of new bookkeeping standards, regulations such as the European service rule and some hotly anticipated e-government projects. The biggest difference between the countries is that outsourcing is highly developed in countries like the UK or Australia, while countries like France, Eastern Europe and China are late adopters.

Telecoms
Telecom will continue to suffer from strong price pressure. Major IT in 2010 projects will include NGN (next generation networks) and the development of new (value added) services (mobile payments, web 2.0, content, etc.).

Utilities 
Utilities are both a traditionally resilient market and are benefiting from some industry-specific issues: liberalization, unbundling, information management, smart grid and smart metering. Similar to the public sector, outsourcing tendencies vary strongly between countries.

Retail
Retail will remain a very difficult market in most countries, especially in countries dominated by discounters. Discounters are well known to be both very economical and the toughest purchasers. On one hand, there should be interesting investment areas such as materials management, BI and multi-channel integration. On the other hand, the retail market might be hit hard by bankruptcies.

Services and Consumers
Services and consumers is a very diverse industry and very much impacted by the crisis. Interesting investment areas will include multi-channeling and billing in media and process automation in professional services.

Transport
Transport includes both logistics (strongly impacted) and passenger transportation (less affected, except airlines). Investment areas in 2010 should include fourth-and-fifth-party logistics and customer-oriented solutions such as ticketing, check-in, portals, and payments.

PAC’s Chief Analyst, Christophe Châlons, remains cautious – as are we at TechMarketView – for the much anticipated recovery in 2010.  “There are still important risks linked with unemployment, credit crunch and resulting bankruptcies. Even if volumes are expected to recover in the course of 2010, average prices and rates will be lower than in 2009, thus limiting market recovery," concludes Châlons.

TechMarketView would be delighted to supply you with more details on PAC’s products and services – in particular its European SITSI Research Programme. Contact prajah@techmarketview.com for more details.

Netsuite, the provider of ERP software-as-a-service to the mid-market has reported its FY09. It’s not the biggest SaaS player, but we think it has the most comprehensive functionality, covering financials, ERP, CRM and e-commerce. So, not so big as Salesforce but still something of a poster-child for the industry. One of the oldest SaaS players (and co-founded by Larry Ellison) Netsuite has set the bar for other companies who want to offer international business software as a service, such as SAP with its Business By Design, and has garnered around 6,500 customers to date, 2000 of them since its IPO in 2007.

Despite its heritage, we'd say the company still has a ways to go to match market share with its undoubted mindshare. In FY09, the company grew 9% to $167m, while GAAP operating losses widened to $23m from an $18m loss in 2008. International revenues account for about 20% of the total. The exponential growth of its early years has most definitely trailed off. We spoke with CEO Zach Nelson on a recent visit to London and he is a good ambassador for the company and its products, which continue to garner customers (295 added in the last quarter). But there can be no doubt that the competition will intensify massively over the next couple of years. Netsuite needs to make the most of its market lead while it still has one.

We read in The Times that Visma, a Norwegian accounting software company, is likely to be sold or floated on the LSE by its owner, Hg Capital.  Sage Software tried to buy Visma back in 2006 but was outbid by Hg. The paper suggests that Sage may try again for a trade buy now. Visma is no major threat to Sage, but could represent a good inorganic growth opportunity. Recent discussions with Paul Walker, Sage’s CEO, make us think that Sage would be happy to pursue its historic path of growth by acquisition as the opportunity arises.

For a privately owned company, Visma’s accounting is admirably transparent. It had sales of NOK3.4b in 2009 – around £355m – up 11%, with software revenues up 5% organically. 44% of its revenues are from software; 37% from BPO and the rest from other services and solutions. It derives 54% of its revenue in Norway, 29% in Sweden and the rest from Denmark, Finland and the Netherlands, and had an EBIT margin of 15% last year, up 1pp. The Times believes a flotation would value the company at around £700m (the price Sage nearly paid in '06 was £334m). It was thought at the time of Hg Capital's purchase - it outbid Sage by around 15% - that Hg would try to combine Visma with the UK's Iris, building some sort of Sage competitor but this never came about and it sold Iris to H&F. If Hg gets £700m now, that would certainly be a decent return. That price would be a pretty big sum for Sage, whose own market cap is c£3bn, but Sage would surely love to get back on the growth path as its underlying business has seen (organically) declining software revenues. 

We reported 6 months ago that Kofax, the document systems provider, had a disappointing FY09 with falling revenues in all regions once currency effects were removed. Nevertheless we saw CEO Reynolds Bish’s structural changes as positive and the acquisition of 170 Systems as a good move.

Today’s interim results indicate that things are now moving in the right direction. Revenues were up 9% to $168m, and more important as a future indicator, software revenues grew 17% “as reported”, (including the 170 Systems contribution), with new license sales up 7% on an organic, constant currency basis. Software services were up 11%. The hardware business shrank 3% (organic, ccy) in line with falling hardware costs everywhere. Hardware (including related services) is now down to 40% of Kofax’s business.

Looking forward, the company expects more of the same: mid-single digit growth (organically) in its software business for the year as a whole and flat or single-digit decline in hardware – steady as she goes.

RM CEO Terry Sweeney reports “good progress” across the educational supplier’s three divisions and its international business. According to the Group’s IMS this morning, trading in Q1 was “supportive of management’s expectations”. However, RM’s business reflects school buying patterns is therefore highly seasonal with the majority of the year’s profit arising in the second half and Q1 traditionally being the lowest for revenue and order intake. As a result, performance at this stage of the year is not a reliable indicator for the year as a whole.

RM has reported some encouraging contract wins in the first half – most recently its Building Schools for the Future (BSF) deal at Essex – but we’ll have to wait for its interim results to get a better feel for how FY2010 is shaping up. By now, RM ought to be beginning to see the benefits its 15 BSF contracts. But at the same time, we suspect that (despite school budgets being relatively well protected) the individual schools business will find the market tougher going as schools prioritise against the backdrop of public sector funding cuts.

SAP surprised the markets last night announcing that CEO Léo Apotheker had left the company with immediate effect after a ‘mutual agreement’ not to extend his contract beyond the end of 2010. He had been with the company for 20 years but (sole) CEO for just 8 months, taking over from Henning Kagermann. The company has appointed two co-CEOs: Bill McDermott, head of field organization and Jim Hagemann Snabe, head of product development, both already members of the SAP Executive Board. SAP also said that Chairman and SAP co-founder, the charismatic Hasso Plattner, would “play a strong role in advising the new leaders on technology and product development.”

The reluctance to extend Apotheker’s contract is, we believe, a reaction to SAP’s poor performance in new licence sales last year, relative to Oracle and others, and to the hash over the issue of raising maintenance fees. SAP has looked to us like a wounded animal lately, with a lot of (non-attributable) comment in the industry about how they’ve “lost it”. Perhaps the internal view is equally bleak – or more so. The FT reports that an internal staff survey last year found a dramatic loss of confidence in top management.

In our view this news is potentially a positive for SAP. One problem we had with Apotheker was that in the early days of SAP’s attacks on the SME market – when he was head of sales – he didn’t seem to ‘get it’ in terms of what it took to build a good channel to the mid-market. More recently, the Business By Design project (the mid-market oriented SaaS offering) has not gone well, and as CEO he must carry some of the blame. And, as mentioned above, the move to increase maintenance fees upset customers and the company had to climb down publicly.

The idea of co-CEOs may sound a bit dubious, but it could work – it was certainly successful in the days of the Plattner/Kagermann team, from 1998-2003, arguably SAP’s best years – though in truth, Plattner always seemed like the CEO with Kagermann as COO. They're trying to re-create the 'dream team'. We think Bill McDermott will overhaul the salesforce and take the Plattner role, while Snabe takes the Kagermann position. We think McDermott will appeal more to the Wall Street investment community than Apotheker, which will help the share price. Will these changes restore SAP back to its former glory? It will take more than a new management structure: the IT world is changing profoundly. An awful lot hinges on the re-launch of Business By Design.

SAP is hosting an analyst call later today – if we learn anything more we’ll report it thereafter. Meantime we can reflect that in Anthony’s “2020 vision” speech last week he predicted SAP being acquired within the next decade… it may come true sooner than we expected!

We reported back in November that revenues at AIM-listed POS and ticketing management software company, Clarity Commerce, showed growth overseas but fell in the UK. So Clarity was no doubt delighted to report a £2.6m POS contract win today with a “multi-country restaurant operation”. The three-year project starts with a UK-based pilot in April and May, with roll-out from then till November, so the effects are not likely to fall in this FY. But it’s a banker for the next FY. Clarity’s annual revenues last year were £18m so this will give a significant uplift.

I have recently been bombarded with emails from every retailer I’ve ever bought from, with bright ideas for a Valentine’s present for my loved one. But I was more than a little surprised by one from auctioneer Bonhams&Butterfields (who I have never knowingly used) alerting me to a sale of early computer manuals amongst other old books. Despite the slightly nauseous feeling inspired by the email title: “For Techie with Love on Valentine's Day” (surely some desperation in the marketing department there) I read on and was amazed by the prices. Readers with some old copies of manuals might have something of hitherto unsuspected value – or someone may even be inspired to bid! Examples include:

-  "Mathematical and Logical aspects of an Electronic Computing machine" by Herman Goldstine and John Von Neumann + 1 other (est. $500 – 700)

-  an assortment of early internal IBM publications and offprints - "704 Training Manual," with "704 Problems" + some others (est. $800 - 1,200)

-  1961 guides to Fortran programming plus printed broadsides and handouts issued by Remington Rand and covering the Univac and Ferractor systems (est.  $300 – 500).

Anyone out there still have their IBM 704 manuals to hand? The online catalogue can be found here. 

Facebook celebrates its 6^th Birthday with an announcement today that it now has 400 million users. That means they have added 250m users since I wrote FaceBook – Now we are Five It is also understood that they are now profitable on a monthly basis.

I’ve written much on Facebook over the years and, indeed as my Facebook friends will testify, I’m quite a fan. The MyTop concept that I introduced several years ago was all based around FaceBook being the portal of choice on the mobile internet. At the time (as in almost everything I say) the concept was greeted with a mixture of amusement and derision. I think people thought I had lost my marbles when I wrote an open letter to Mark Zuckerberg on the subject (See my 7^th Sept 07 post Mr Zuckerberg – MyTop - It could be you!) and probably thought I should be sectioned when I wrote a similar open letter to Steve Ballmer (See my 26^th Oct 08 post -  My advice to Steve Ballmer) suggesting Microsoft buy Facebook (instead of Yahoo which was being contemplated by Microsoft at that the time) as their consumer portal to the cloud.

It reminds me of my favourite quip from the late Bob Monkhouse who said “When I told them I always wanted to be a top comedian, they all laughed. Well, they’re not laughing now!”

The GSMA found that in Dec 09, Facebook dominated mobile internet traffic. Almost 50% of all the time the 16m users of mobile internet in the UK spent was on Facebook. Indeed they beat Google into second place. Facebook is truly now the MyTop of the mobile world - the first, and sometimes only, port of call for mobile users.

Please remember you read it here first!

At yesterday’s excellent Regent-Intellect conference, one of the most oft-recurring themes was, unsurprisingly, the Cloud. So it’s instructive that one of the more visible Cloud pure-plays, SuccessFactors, reported its FY09 yesterday.

SuccessFactors offers HR software-as-a-service. It is not the biggest SaaS company, but due to the nature of its deployments it probably has the most users: it claims over 5m users from its 3,000 customers (Salesforce claims 2m from 69,000 customers). One of its more recent deals is with Siemens, a whopping 420,000-seat licence (considerably larger than IBM's LotusLive deal with Panasonic - see Cloud helps IBM Lotus capture Panasonic).

The overall message from the results are that it’s doing well saleswise but profits have yet to appear. Revenues for the year were up 37% to $153m. In the Q4, revenues rose 28% but bookings rose 34% (y-on-y) and 26% sequentially, so the growth continues. Its sales strategy and 'business execution' message is undoubtedly working well, backed by the fashionable nature of its delivery model. Operating losses shrank from $62m in '08 to $12m in '09. Excluding ‘stock-based compensation’ the company made a small profit at the operating level in Q4.

The company also announced it is to acquire an Australian software company, Inform, which offers workforce planning and analytics, also with a SaaS model, for approximately $40m in cash and stock.

For the coming year SuccessFactors is forecasting a more modest 17% growth and similar margins – including the effects of Inform (which will not close till Q3).

It is a consequence of the revenue model for SaaS that a fast growing company is unlikely to see much profit: it needs the ongoing rentals to outweigh the cost of (new) sale. Even Salesforce.com has only reached 9% OP margin – low for a software company. The interesting question is how long investors will support higher multiples on companies with more distant profits than traditional software companies. In SuccessFactor's case, the company’s stock grew strongly and steadily last year: up 200%, vs the Nasdaq's +44%, but after peaking in early January it has fallen more sharply and consistently than the Nasdaq (and down 5% in after-hours trading last night). It's a sentiment thing: Salesforce's stock has followed a similar, though less extreme pattern. SuccessFactor's market cap is still over $1bn, however – a PSR of around 7x.

It is as if Unisys operates in a parallel universe! They must be one of the only players seeing hardware sales and margins surge forwards, as they did again in Q4 (to 31^st Dec. ’09).

Whereas services revenues declined 14% yoy (constant currency) to $1.02b, product revenues grew 11% yoy ccy, albeit just to $192m, about 16% of the total. Services gross margins declined 150bps quarter-on quarter to 16.9% though this was 130bps higher yoy. Services operating margins fell 130bps qoq to 6.4% but this was double that a year prior. The services order backlog crept up $100m qoq to $6.5b, which was $400m higher than at Dec. ’08.

In stark contrast, Unisys’ product gross margins are now 61% with 31.5% operating margins, on the back of “strong sales of higher margin ClearPath enterprise servers”. Even IBM’s product gross margins are ‘only’ 43%. Either their boxes are something special or their salesmen are!

Anyway, this was the third consecutive quarter of net profit for Unisys, though CEO was clear that “the turnaround is not complete by any measure”. Indeed there’s clearly much more work to be done on the core services side of the business.

Financial services software company Total Systems has issued a Q3 IMS that doesn’t bode well. At the half year it reported revenues down 17%, to £1.8m and operating losses of £450k (compared to £500k profit the prior year). The IMS states that trading was ‘much improved’ in Q3 but ‘of a non-recurring nature.’ It then continues: “business continues to be very weak…turnover for the financial year is likely to be significantly less than for the prior year.”

We are not convinced that Total should be listed at all (see Total recall) – it has never really grown and more than half the shares are owned by Chairman Terry Bourne and his family. But as we said last year (Total battles on), it is a survivor. The IMS also says that Total’s financial position “remains healthy with no debt and improved cash balances to support operations. The Company owns its office premises outright.” We expect it will survive again to fight another day ‘as market conditions improve.’

Software AG (SAG) this morning released its FY09 results. Separately, it announced that it intends to fully integrate IDS Scheer (it currently owns 91% of the stock) during the coming year, purchasing the outstanding shares.

FY09 was OK for SAG, made much better by the IDS Scheer takeover. IDS has increased SAG’s revenues some 40%, while staff numbers increased 71% to 6000. For the year, revenue was up 18% to €847m, with EBIT up 21% giving EBIT margin of 26%. The inclusion of IDS Scheer has not hit margins: EBIT in Q4 was up, from 25.8% a year ago to 27.4%. But the company is looking for savings from the integration in the coming year. Excluding the contribution from IDS, revenues for the year were flat with product sales up 2% (though new licences were down 8%) and services down 5%.

The webMethods middleware business was up 3% but recovered strongly in Q4 with licence growth of 21% year on year. Service revenues soared 48%, to €262m, due to the contribution from IDS.

Looking forward, Software AG is forecasting total revenue growth of 25 to 30% in 2010, with product revenue growth of 12 –15%. Including a full year of IDS Scheer’s revenues will push it comfortably over the €1bn sales mark.

SAG’s position in the UK is not well recognised. It is particularly strong in the public sector – about half its UK sales – and counts as one of the UK’s top 20 software providers. The acquisition of webMethods a couple of years ago had a transformative effect on its market position and prospects, and integration of IDS Scheer’s BPM capability will have a further big effect: we think BPM is one of the big software trends of 2010. We will be publishing a more in-depth analysis of Software AG and its UK business in the next couple of weeks.

AIM-listed Formjet, the software distributor, released its results for 2009 and they tell of a turbulent year. Following the appointment of a new CEO, Andrew Monk, in July, the company sold its subsidiary Panda Software (UK), a software distributor, reducing its ongoing revenues from £3.6m in ’08 to just £868k. It also wrote off a loan to its Benelux operation. The sale should raise around £1.2m and the company intends to look for acquisition targets to build a new business. One (unnamed) target was identified but issues arose and it was abandoned. In view of its new approach, the company is planning to change its name, to Third Quad Capital Plc. It intends to continue with its AIM listing though it acknowledges it is too small presently to justify the cost. It does have some ongoing business with growth prospects, but costs are currently rather higher than sales so the immediate goal is to tackle that issue – before the money runs out!

You might think that Autonomy’s share price was already pretty high – with a market capitalisation of some £3.8bn, giving an impressive PSR of around 8x. But Autonomy is keen to push this up further. TechMarketView Foundation Service clients can read why, and what else happened in its results briefing, in our UKHotViewsExtra analysis here.

We commented yesterday (Xploite: Turnaround opportunities proving elusive) that one of the inhibitors to M&A in the current market is that sellers often have higher ideas of their company’s value than buyers are prepared to pay. We have heard this refrain several times from PE firms and M&A advisors. One way around this is to try to pick up a distressed company at a fire sale price – which is exactly what First Derivatives, provider of software and services to the capital markets industry is doing.

The AIM-listed company announced today it is negotiating to buy Dublin-based Cognotec, a provider of FX software, from the receiver, KPMG. In the year to November 2008, Cognotec reported revenues of $18m (c£11m). So this would represent a significant boost for rapidly growing First Derivatives, which last year reported revenues last year of £18m (up 34%) and then interims of £11m, up 66% - assuming, of course, that in the intervening period Cognotec has managed to keep going at a similar rate (there must be a good reason it's in receivership!) Back in October First Derivatives also acquired a US-based software company, Reference Data Factory, for around £6m, plus it has taken a stake in a California-based software company, Kx Systems, and before that an Australian company, Hologram, so it looks like there will be a fair bit of inorganic growth to be reported this fiscal year (which ends this month) and more to come next year.

Clearly not up for retirement just yet, ex-Sage founder Graham Wylie has just made his 23^rd acquisition in a little over six years after founding his SME software and services mini-conglomerate, Technology Services Group (and thanks yet again to Paul Kunert at Microscope). This time it’s Newcastle-based network and infrastructure services firm, Croft Technology. The deal brings TSG’s headcount up to 460 though we have no clue what it does to its financials as TSG has yet to file its 2008 accounts. And there’s a promise of more M&A to come.

I admit it. I just don’t know how you go about even trying to make 20+ disparate twenty-man companies scattered across the country work in any semblance of blissful harmony – or maybe you don’t even try. Still, there’s little doubting the sage Mr Wyllie’s entrepreneurial credentials and perhaps one day the ‘grand plan’ will become apparent.

As tipped last week by the excellent Paul Kunert at Microscope, support services group Phoenix confirmed it is taking over break/fix support at comms services player, KCOM through a reciprocal outsourcing and acquisition arrangement. Phoenix is to pay £1.8m cash for the break/fix contracts and take on 142 KCOM staff. Phoenix management advise that the “multiyear” outsourcing deal will be profitable from day one though declined to put a value on it. The broker estimates that I have seen suggest the contracts are worth £6m p.a. to Phoenix. Seems very fair to me. And it’s just another great example of ‘sticking to the knitting’ - KCOM want to be providing telecom services, not fixing broken boxes – which is of course Phoenix’s strong suit (well, one of them, anyway!). Good stuff – for both companies.

We note that one of the more high profile elements of the Government’s ICT Strategy is a step closer to reality this week. Prototype versions of the Government Application Store (G-AS) – a central store of software applications that can be accessed by public sector organisations in ‘the cloud’ – have been made available to a selection of UK Government bodies. The aim is to allow software applications that are widely used across the public sector – such as ERP applications – to be supported from the cloud. The intention being to save on the money currently spent supporting hundreds of separate versions running in a multitude of datacentres.

The pilot will determine if the G-AS is technically achievable and will also help to gauge the likely level of adoption by public sector departments and agencies. However, there will still be hurdles to overcome. In my mind the biggest barrier is cultural. Government bodies are notorious for their lack of willingness to accept change. For too long they have favoured bespoke solutions tailored to what they believe to be their unique situation. Getting them out of that mindset will be incredibly tough. The good news? The current public sector spending cuts will force organisations – both central and local – to at least consider ‘re-use’ rather than embarking on fresh procurements and the G-AS will make re-use possibilities more visible.  Nonetheless, the CIO Council has a big challenge in building support for the new approach.

The other big issue up for debate is the level of savings that can be achieved through the G-AS implementation. The UK Government IT strategy cited anticipated savings of £500m p.a. over the next ten years (that’s a large chunk of the £3b per annum savings it is looking for). However, that calculation is based on some interesting numbers. For example, the ICT strategy states that a large government organisation can have between 300 and 1,000 applications in its portfolio... but it doesn’t highlight how many of those will be candidates for cloud computing. A £500m saving over ten years seems ambitious.

Regardless of potential savings and timescales, the pilot and its outcome could change the S/ITS supplier landscape in UK Government. The trial versions will be built on four existing cloud platforms from Microsoft, Cisco/EMC/VMWare, Amazon and a “major supplier of utility computing”. It is likely that more than one of these platforms will be used should the pilots be successful thus putting the selected platform supplier in a strong position in UK Government. In addition, software suppliers will be looking to get their applications accredited in order to host software targeted at the public sector on the G-AS. The trick for these suppliers will be to judge how much to invest, and when, in order to ensure software applications will get accredited. And that will depend how quickly they think G-AS will become a viable alternative to the status quo. Martin Bellamy, director of the office of the government CIO, and the civil servant in charge of the G-Cloud Project is cautious; at last week’s GovNet event he asserted that it would take four to five years to build up the G-Cloud and the application store and at least another four to five years for them to become widely used across the public sector. Knowing the optimism of UK Government when it comes to IT projects, we regard that as the best case scenario.

At the risk of sounding repetitive, Autonomy’s revenues steamed forward again in Q4 as presaged in its trading update last month (see Autonomy tackles cash conversion worries). Q4 revenues (to 31st Dec. '09) rose 53% yoy to $223m as reported (16% seq.). Per IFRS, gross margins improved nearly 5ppts seq. to 82.8%, though still lags the 88.5% in Q408. Q4 operating margins were 43.4% (Q408: 48.8%). These results brought Autonomy’s full year revenues to $740m, up 47% as reported and 16% organic. FY gross margins were over 6pts lower yoy at 81.4% and operating margins were 30bps light yoy at 36.8%. We raised a few questions in our prior post which we hope will be answered in this morning’s briefing – so you can expect more from Philip Carnelley later.

We last reported on “buy, build and sell” operation, Xploite, in June – just one month after it sold off its Managed Services Operation, Anix, for £31.5m (Xploite shows the power of the ‘dark side’ and Xploite sells Anix: Who next?). Following the sale, Xploite repaid all its bank debts and was left with £12.7m in cash.

We fully expected another shopping spree to ensue. However, final results published today reveal that Xploite has had a hard time finding “suitable and sizeable acquisitions” in which to reinvest. As a result, Xploite returned £9.5m to shareholders and has decided to focus on pursuing more “modest sized acquisitions”.

So, with just one remaining trading business – Storage Fusion (storage analytics delivered as Software-as-a-Service) - Xploite’s continuing turnover for the year ended 31^st October 2009 was just £140K. Storage Fusion was originally acquired in October 2007 (although it was then called Itheon). But, up until the last autumn, the sales strategy for Storage Fusion was proving unsuccessful. The good news for Xploite shareholders is that the revised strategy, which sees the software (Storage Resource Analysis) distributed to customers using resellers, appears to be doing the trick. Over the last few months some of the big IT services companies – IBM and Unisys to name just two – have signed up as SRA service providers and Xploite states there is now a visible pipeline of opportunities.

Xploite’s track record is comforting – the Anix investment delivered an IRR on net capital invested of 39%. Now, with all management attention focused on just one investment, Storage Fusion’s fortunes look to be improving. But, what next? Xploite seems assured that there are significant new opportunities for consolidation in the market but so far suitable opportunities are proving elusive. There are a plethora of ‘growth’ companies out there looking for investment – is someone missing a trick in helping to bring them together with willing investors like Xploite? Or, as has been suggested to us, are sellers in the market demanding higher valuations than buyers like Xploite are prepared to offer? Perhaps a healthy dose of realism would get things moving again.  

Mid-market software and services firm Maxima’s interim results show trading in the first half was down on last year in line with revised expectations (see Maxima shrugs off QAD woes). But CEO Graham Kingsmill reports “encouraging signs of recovery” across many parts of the business with enquiries, pipeline and order intake steadily improving. He believes the outlook is consistent with expectations for the year as a whole and plans to simplify and focus the business are progressing well.

Despite undoubted progress in difficult market conditions, the numbers themselves show the new management team still has work to do. First half revenues were down over 7% at £26.2m, adjusted operating profit (before all the nasty bits) was down to £2.9m (H109: £4.3m) and the company made a loss before tax of £0.6m (H109: profit £1.3m). Improved cash conversion helped net debt decline to £13.5m (30 Nov ’08: £17.5m) ahead of previous market expectations.

The fall in revenues and profits is largely blamed on challenging trading conditions, which have hit product revenues and put pressure on consulting day rates in some areas. This was partly offset by an increase in recurring revenues to 60% (H108: 54%). The impact of QAD’s decision to sever its relationship with Maxima (see Maxima loses QAD distribution rights) appears to have been contained and Maxima is hopeful of retaining many QAD customers with whom they have built a strong relationship over the years.

Maxima has also invested in growth opportunities and progress on focusing the business looks to be going well. When I spoke to Graham Kingsmill and CFO David Memory this morning it was clear they haven’t been resting on their laurels. They’ve identified four core competency areas for Maxima – the Microsoft Dynamics enterprise software product, Business Intelligence professional services, Network Infrastructure & Communications Services and Virtualisation Services – and are already winning business as a result of this new focus.  All in all, we were encouraged by their plans for the business which include growing their offshore capability (currently 35 strong) and leveraging their skills to support Cloud Computing.

Thanks to George O’Connor at Panmure Gordon for bringing to our attention the Capgemini acquisition of on-demand purchasing solutions provider IBX.

George reports “With this acquisition, reportedly, comes the availability of the industry’s first global end-to-end, Procurement-as-a-Service offering. The two have collaborated together since summer 2009, and decided to join forces in order to drive development of a new global procurement service offering.

According to AMR outsourcing of supply management processes has grown in recent years: “The market grew 30 percent in one year, driven by procurement and strategic sourcing services being offshored to India in record numbers. We admit that we like how this feeds into Capgemini’s Rightshore offer."  

Headquartered in Stockholm, IBX has 240 employees located across Europe and in the US. It is billed as company is a strong cash-generating company with annual revenue of €30m and a 16% EBITDA margin. IBX operates 2m purchase orders per year for more than 200,000 end users. Clients include Ericsson, Kraft Foods, IKEA, Deutsche Post DHL, LEGO System , Skanska and Deutsche Lufthansa”.

There’s news of another big Building Schools for the Future (BSF) win for RM this morning – Essex County Council has chosen the Skanska RM consortium as preferred bidder for its BSF programme, which is one of the largest in the country. The first phase is worth around £150m in total for buildings and ICT – we estimate RM’s share is likely to be about 10% of that.

It’s no great surprise to see RM succeed at Essex since it has a long standing relationship with schools in the County. It's still welcome news though with BSF the only major driver for growth in the UK education SITS market at the moment. RM is the clear market leader in BSF with some 15 contracts under its belt – now all it has to do is make a profit from them!

There’s only two more days to go for you to get a seat at Europe’s premier CEO tech event, The Intellect Regent Conference. It’s well recognised in the industry as the conference which sets the scene for the year ahead – and beyond – in European tech, and is one of the best networking events in the calendar.

Among the speakers is our very own managing partner, Anthony Miller, who will be dragging you kicking and screaming into the year 2020 when the world of software and IT services will be dominated by Visioners, Assemblers and Deliverers! And surely you wouldn’t want to miss Anthony’s “2020 Top Ten Countdown”, ranking the IT suppliers ten years hence – there’s lots of surprises!

Anthony is just one of a superb line-up including Logica CEO, Andy Green, Sage CEO Paul Walker, Amazon Web Services head, Simone Brunozzi, Alcatel-Lucent VP, Houston Spencer,and  Jon Moulton, founding chairman of private equity turnaround specialists, Better Capital. The event is rounded off as always by his trademark thought-provoking presentation from Regent’s urbane executive chairman, Peter Rowell. By the way, the Regent Conference also welcomes a new MC this year, renowned BBC political editor, Nick Robinson, who will continue the fine tradition of keeping the speakers on their toes!

Don’t hesitate – book now for the 2010 Intellect Annual Regent Conference on Thursday 4th February at the Lancaster London. You can see the full agenda here and then contact Tina Compton at Intellect (tina.compton@intellectuk.org) to see if there are still seats available.