Megabuyte - Technology sector intelligence

Ofcom has held its half yearly briefing for analysts, this time covering mobile termination rates (MTRs),  broadband access and net neutrality. MTR is proving highly contentious, with a final decision almost certainly subject to legal challenge; whatever happens, rates will fall by 65-88% over the next four years. On broadband access, Ofcom is looking to speed up and extend the scope of pole and duct sharing, and is seeing increased interest in sub-loop unbundling in rural areas.  The net neutrality debate continues to puzzle most regulators outside the US, including Ofcom. See Newswire Plus for more.

Autonomy’s pleasing Q2 cash conversion

Autonomy’s interim results show a continued strong performance in Q2, with headline and organic revenue growth of 13% to $221m, PBT and EPS and 9% and 7% respectively, and strong cash conversion of 98% (against 95% in Q1 and 66% the previous year). The company is seeing a ‘gentle recovery’, with positive moves in Power and OEM parts of the business, and reiteration of the potential for meaning-based marketing, with several multi-million dollar sales in the pipeline. The MicroLink acquisition has already led to a major new contract with a US federal customer.  Autonomy’s strong momentum is therefore being maintained, but with a pleasing improvement in cash collection, which has been our major concern with the company.

COLT seeing improved customer confidence

COLT has released a fairly upbeat interim report, showing slower revenue declines and stable EBITDA for the first half, implying a better Q2, and caution giving way to improved confidence for the second half. Managed Services continues to be a bright spot, highlighting the rationale behind the company’s recent investment in data centre freehold. Read more in Newswire Plus.

Microgen’s solid results being driven by MASD

Banking software vendor Microgen has released a solid set of interim results, with 19% growth in continuing operations to £16.1m being driven by 66% growth in the Aptitude division (MASD). This, and MASD’s increasing profitability,helped drive adjusted operating profit up 50% to £3.8m, and EPS also up by 50%.  Cash generation of £3.2m grew net cash to £23m, and the company has decided to return £10m of this through a tender offer and to increase the interim dividend by 12.5% to 0.9 pence. Read more in Newswire Plus.

IMImobile gets just 42% WIN acceptances

At the first closing, IMImobile has received acceptances covering just 42% of WIN shares, short of the 50% target threshold. IMI has therefore extended the offer until 4th August. Given the recent indicative offer from ECI/MIG at 150p (Premium Plus readers seehere), we would be very surprised if the extended offer will flush out more acceptances.  However, it does mean that the Board will be under increasing pressure to open its books to ECI/MIG, and may flush out other bidders, possibly including Amdocs? Talking of which....

Amdocs has plenty of cash for a WIN bid.

Amdocs, the NASDAQ-listed supplier of ‘Customer experience systems’, has reported Q2 revenues up 4.6% year on year and 2.6% sequentially to $744m, at the top end of guidance when adjusted for foreign exchange movements, with EPS likewise at the top end.  The company expects to continue growing by 1-2% going forward, driven partly by new acquisitions including MX Telecom (Premium Plus readers see here), which it bought to build its presence in mobile payments as well as expanding geographically. With net cash generation of $148m in the quarter, and $1.4bn of net cash, it would not surprise us if Amdocs is not now also running its slide rule over MX peer WIN, which would be a snip at £16m plus.

Check Point building blocks with strategic investments

Security software maker Check Point's Q2 2010 results beat market expectations. Backed by growth across all geographies, revenue was up 17% to $261.1m, exceeding the company’s previous guidance of $245-$259m. The growth was mainly driven by product sales that went up 25% to $103.9m, while maintenance and services revenue was ahead 12% at $157.2m. These numbers also included results of recen tly acquired Liquid Machines, a US-based data security company; however, management claimed that this acquisition was part of a long term strategy and will not have a significant impact on revenues for the next two years. Check Point’s net income was up 36% to $102.9m, mainly due to better operating synergies from the acquisition of Nokia’s security appliance business last year. Read more in Newswire Plus.

Sky sells Easynet to management team

BSkyB has sold Easynet in a management buyout backed by LDC for £100m. Sky paid £211m for Easynet in October 2005, though the two prices are not directly comparable as Sky will be retaining ownership of Easynet’s national network and LLU infrastructure.  Easynet will have access to the network, and will also continue to supply Sky with the core network services underlying its broadband and fixed line telephony services.  In the most recent quarter (Premium Plus readers see here) , Easynet reported £50m of revenues and £4m of operating losses, with revenues fairly stable but operating losses halving in recent years.  However, Easynet recently secured its largest ever external contract – a 10 year deal for Transport for London – suggesting some organic growth possibilities.  A 0.5x sales multiple is towards the bottom end of the Megabuyte Fixed Line peer group of 0.5-1x, but is probably reasonable given Easynet’s current unprofitable status.

Mobile Streams turns a corner

Mobile content provider Mobile Streams has had a relatively successful first half of the year, off the back of strong growth in mobile internet revenues in Latin America, whilst mobile operator revenues have stabilised. Revenues for 1H10 will be £4.2m, up c20% year on year and sequentially and reversing previous revenue declines, with EBITDA of £0.1m. Cash has fallen £0.3m to £1.4m due to investment in Appitalism.com, an app store due to launch soon.  A creditable performance given the rapid rate of change in mobile content markets.

Sopheon’s good June

Provider of product lifecycle management software Sopheon has reported that a flurry of new contracts in late June means that it will report first half revenues and EBITDA materially ahead of last year, and with a significant improvement in full year revenue visibility.