Busy Prokom reins in 2003 expansion plan
Possible IT niche acquisition targets for 2003 include firms specializing in geographic information systems (GIS), data encryption and the increasingly fizzy energy sector, Szturmowicz said. Prokom is reported to be negotiating takeovers of two niche IT companies, Geographic Information Systems (GIS) and the Comp Group, but Szturmowicz would not confirm it.
"We will focus on much smaller niche companies with very specific know-how that could be added to our capacities and skills," he said.
Sobiesław Pająk, an IT analyst at Bank Pekao, praised Prokom's plans for niche acquisitions in 2003.
"The strategy makes a lot of sense for the obvious reason that should Poland become a member of the European Union; three months from now the competition on the domestic market will become more fierce," he said. "To adopt a defensive move by increasing operating leverage to be bigger will make life harder for potential new entrants."
Shaping up to EU impact
Polish systems integrators, such as Prokom, face increasing competition from strong domestic rivals, foreign multinationals and new players entering the market as a result of Poland's accession to the EU, scheduled for 2004. Prokom embarked on a consolidation strategy a couple of years ago by acquiring stakes in other IT firms to strengthen its market position and shape up for new contracts that Poland's EU membership will generate. The firm intends to wrap up its consolidation strategy by the end of 2003, Szturmowicz said.
Prokom expects its revenue to jump by a few percent during the next two years from sales boosted by EU contracts, although these contracts should usher in rapid revenue growth of at least 50%, Szturmowicz predicted. The firm reported overall revenue of zł. 1 billion ($238 million) in 2001 and anticipates this to grow by 10% in 2002.
Prokom, Poland's largest IT company with a market capitalization of about zł. 1.3 billion ($310 million), will also address its efforts in 2003 toward fully integrating its most recent major investments, including its strategic stake in Softbank. In mid-September, Prokom signed a preliminary agreement with the banking software company to increase its 10% stake in the company to 33% for about zł. 75 million ($17.9 million).
After becoming Softbank's strategic investor, Prokom hopes to win contracts in the banking sector in 2003, especially since the share purchase was accompanied by an agreement Prokom signed with ACS, a joint venture between American IT giants IBM and Alltel, to download Alltel Corebanking solutions in Central Europe.
IT analysts had previously said that Prokom might raise its 12% stake in systems integrator Ster-Projekt, but Szturmowicz thought that "unlikely."
He also said that in 2003 Prokom would continue to depend on its major IT contracts with enterprise customers, including national telecom kingpin Telekomunikacja Polska (TPSA) and the Social Insurance Administration (ZUS), to generate a steady revenue stream. Such big contracts generate about 60-65% of Prokom's business.
Prokom also expects to complete the merger of its IT companies PUP Spin and Optix Polska in the second half of 2003, Szturmowicz said. The merger would create the third largest IT company in Poland, which Prokom intends to list on the Warsaw Stock Exchange (WSE). Prokom acquired a stake in Spin, a Katowice-based IT firm specializing in billing systems, in January 2002 for about zł. 135 million ($32 million).
No new Internet projects
Prokom's 10 or so Internet-related companies would likely play a part in the firm's overall service offer in 2003, Szturmowicz said, although the parent company did not invest any additional funds in them this year. He added that there was no need for Prokom to purchase any new Internet firms next year, and that it would retain its minority stake in Wirtualna Polska (WP), Poland's second largest portal, as a long-term investment. Last December, Prokom sold a majority stake of WP to TPSA.
But Pająk said that Prokom's money-burning Internet companies were not an integral part of its core business, and that the company could shut down some of them in 2003.
"The core business is so big that the growth of small Internet players can't make them visible contributors to the overall results," he said, adding that only a few of the Internet-related firms would break even this year.
Prokom said that a few of the companies were expected to show positive results when the firm releases its mid-year financial report on Oct. 21.
