Datatec says BEE partner will help double operatio
Datatec says BEE partner will help double operations
November 9, 2005
By Thabiso Mochiko
Johannesburg - Technology firm Datatec would double its local operations when it partnered with a black economic empowerment (BEE) group early next year, Jens Montanana, the chief executive, said last week.
He would not reveal the name of the empowerment partner, but said it was an existing technology services empowerment group. The groups would form a subsidiary, which would be the holding company for Datatec's local businesses and those of the new merged entity.
Montanana said black ownership of the new entity would be closer to 50 percent than the minimum 26 percent prescribed. The new entity would not be listed on the JSE.
Local operations contribute 1 percent of Datatec's revenue through subsidiaries Westcon AME and RangeGate. The remainder comes from its operations in Europe, Asia, North America, the Middle East and South America.
Westcon AME, a value-added networking equipment service, decreased revenue to $17.8 million (R120 million) from $22.7 million for the six months to August. Revenue from wireless mobile technology business RangeGate fell from $3.2 million to $2.2 million.
Montanana said that after the deal, the local businesses, which were predominantly distribution, would include technology services and consulting and would be aligned with the international businesses.
Analysts said the company had kept the empowerment negotiations secret and it was difficult to speculate who the partner might be. They added that to help grow the local operations, the BEE partner should bring in information technology skills, have credibility and not just be a "big name" that would not contribute to the company.
Datatec delivered an increase in operating profit to $30.11 million from $2.57 million. Revenue was up 15 percent to $1.4 billion. Datatec will pay its maiden dividend at the end of the financial year.
Datatec also plans to improve the financial contributions made by its services and consulting divisions through acquisitions.
"We don't want to diminish any of our business ... the move is to change the mix and improve other areas."
The distribution businesses contributed about 80 percent to the company's earnings.
Montanana said an achievable three-year target for a change in the group's mix would be more than half of the profits coming from the information technology services and consulting divisions. "We would be doubling this to 50 percent."
The company is eyeing a consultancy company that operates in Asia and Europe in a bid to widen its geographical footprint. Datatec shares rose 5c to R2.40 yesterday. The software and computer services sector shed 0.2 percent.
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