Logica shares plunge on SMS fears
Britain's largest IT company Logica, and producer of accounting and financial software, has seen its stocks tumble 17%, despite reporting healthy interim profits.
More than 60% of the world’s text messages are sent using Logicasoftware, but the market is concerned that the company may lose itsfooting as the telecommunications industry moves towards more sophisticatedforms of messaging.
Logica shares fell 84p after it warned of slower growth at its key textmessaging software unit.
Although the company reported a 21% increase in interim pre-taxprofits, it added that growth in its text messaging business would be ‘atbest’ modest in the second half.
The reason for the slump has been a lack of interest in its text messagingbusiness in Japan. Revenue growth slow in the Japanese market has fallento 9% in the six months to the end of December. In January its keyJapanese customer J-Phone said it was halving its capital expenditure to2003.
Sales for its billing software for pre-paid mobile phones has also slumpedas operators shift their focus towards higher-margin contract customers.
Although text messaging software sales grew 36% in the last sixmonths the impact of the slow billing software business dragged down growthin its mobile networks unit to 28%.
Growth in the second half, was likely to fall ‘significantly’ below thislevel, Logica warned.
In latest trade Logica shares have recovered marginally to 416p.
The company said it remained hopeful that strong growth in emergingmessaging markets such as the Americas and Eastern Europe would help offsetthe impact of weaker Japanese sales.
Dr Martin Reed, chief executive said: ‘Overall, the board is confident thatit will deliver earnings per share growth at least in line with currentmarket expectations.’