Kevin Adams, chief executive of Intec Telecom Systems, says the outlook for his clients is likely to...
Kevin Adams, chief executive of Intec Telecom Systems, says the outlook for his clients is likely to be steady but unspectacular through this year, adding to the pessimistic comments made earlier this week by some observers of the IMA's tech and telecoms fund sector.
"After three years of falling markets all we can see is sand but eventually we must get to an oasis or start to see the grass," he says.
Intec is a key indicator of the demand for software from both fixed line and mobile network operators as it sells products to clients across the world who need to keep tabs on calls made between different networks.
In deregulated markets, such as the UK, one person's call to another is highly likely to pass between different networks before it reaches its destination, and Intec's software helps companies calculate what their earnings share is of any call made.
Comments from SG Asset Management earlier this week suggested that smaller tech and telecoms funds would be culled or rolled over into other vehicles because the poor performance of the stocks being invested in is making survival increasingly difficult.
Adams agrees that the three-year bear market has made it difficult for companies such as his, but adds that current prices are a bit unfair given the fundamentals still in place.
"We are profitable, we still have cashflow, and we will be one of the survivors," he says.
Intec's market value is only about £36m at its current 19p share price, down from a peak share price of £7.14 in November 2000.
"It's all relative, but compared to similar IT stock I'd say our price is a bit low. Compared historically the price is very low."
"The problem with a low price is that it makes it difficult to finance new acquisitions through issues, as the dilution to existing shareholders becomes too much."
Still, sales are possible, even in this climate.
US operator SBC and Colt Telecom accounted for two of last year's biggest sales, Adams says, when Intec persuaded them to replace outdated hardware and software systems from different suppliers for a "simple Intec solution and a couple of Unix boxes".
The sale was hard because Intec had to prove immediate return-on-investment opportunities, but because ROI was clearly there the deals went through.
Longer-term the company is also going to take advantage of growing use of 3G telephony.
Two of its products are already being used to support "3", the new network launched by Hong Kong firm Hutchison Whampoa in the UK.
Growth in the 3G industry will be a case of "slow evolution not revolution" Adams says, not least because there are no "killer applications" yet available to drive consumer demand.
However, phone makers such as Nokia should come up with new functions - Adams believes between five to seven - that will be added to handsets to provide the additional functionality needed to drive higher sales.
Until then, companies such as Intec will continue to do good business on sales of existing products to telecoms operators looking to cut costs and boost their own profits.
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