A bull in a bear run

By : Roseanne Gerin

   Hybrid IT companies were not an unusual sight when Internet fever gripped Poland early last year. Non-tech firms, such as Radom-based shoemaker Ariel, charged into the tech sector with the purchase of Internet service provider Zigzag , through which it hoped to gain big profits from the IT market boom.

   As with the Zigzag acquisition, domestic IT company 7bulls.com (http://www.7bulls.com) is another case in point. In the midst of last year’s IT frenzy, AS Motors (http://www.asmotors.com.pl), a local truck dealer, acquired 7bulls.com to diversify its holdings. Since then it has gradually shifted the company’s core business to IT services.

   While many IT companies – both hybrids and pure players alike – have foundered in the wake of the tech sector’s downturn, 7bulls.com’s business is growing, according to Cezary Augustynowicz, the company’s 34-year-old cofounder and former president, who is a member of the management board.

   The heart of the company’s products and services – Linux – has shielded 7bulls.com against the IT market’s contagion. Augustynowicz argues that cost-cutting in the corporate sector has been a boon for 7bulls.com as firms looking to reduce operating system expenses can save up to 30% by switching to Linux, the free open-source software code that rivals the Unix and Microsoft Windows operating systems.

   Moreover, Stanisław Dyrda, who has been 7bulls.com’s managing director for the past two months, argues that the demand for Linux products and services is increasing “because a number of leading companies in the world are a bit afraid of Microsoft’s domination.”

   About 60 million people worldwide use Linux operating systems, and the open-source software is present in 27% of all servers, according to Augustynowicz’s estimates. “In my opinion Linux is the best operating system (and) the cheapest operating system,” he said.

   Augustynowicz should know. As an IT adviser and coordinator for Germany’s New York Broker Deutschland, the Linux devotee realized he could save his firm “hundreds of thousands of dollars” by switching to the less-expensive Linux operating system, he said. With visions of a Linux company dancing in his head, Augustynowicz along with his partner, Daniel Nuszkiewicz, and with the financial backing of U.S.-based Internet firm German International Internet AG, created 7bulls.com in Poznań in 1998.

   When AS Motors acquired 7bulls.com last year, the IT firm inherited the truck dealer’s listing on the Warsaw Stock Exchange’s secondary market. Eleven million shares are free floating with the rest held by individuals. Plans to list the firm on the primary market have been shelved due to a lack of investor enthusiasm for IT issues. Today the company employs 200 workers, 70 of whom work in the IT sector.

   Besides selling Linux-based software products, such as high-performance servers, 7bulls.com specializes in providing business advisory, consulting and training services to major corporate clients in Poland, including computer makers International Business Machines (IBM) and Compaq and telecom-equipment manufacturer Ericsson.

   “7bulls is probably among the companies that have some sensible Linux-based products, and this part of the market seems to be growing,” said Tomasz Marcinek, a journalist at Computerworld Polska who has written about the company. “If it gets market share early, it may be established within a year or two because it targets business customers and not home users.”

   Although 7bulls.com said its IT business is growing, its most recent financial report tells a different story. The firm’s net sales dropped to zł. 70.8 million ($16.9 million) last year from zł. 111.5 million ($26.4 million) in 1999. Likewise its net profit decreased to zł. 410,000 in 2000 from zł. 4.1 million ($976,000) in 1999. Dyrda said 7bulls.com’s new offices in Warsaw and its acquisition of Warsaw-based RG Studio, its main competitor and the second largest Linux-solution provider in the country, hit last year’s bottom line. In addition, the company is still trying to recover from declining sales in its truck business following the Russian crisis, when demand for its export and transport services dried up.

   Despite last year’s decrease in sales, 7bulls.com is gearing up for new product launches at the end of the year. It is also mulling the possibility of splitting the IT and transport-related parts of the company to put it back on track, Dyrda said. “The situation (on the IT market) is so unstable,” said Dyrda, “but we are doing our best to gain the best results possible in this situation.”