Poised for growth
While last year was a disappointment for ComputerLand and its shareholders, this year will prove to be one of the most pivotal years in the company's history, as a lucrative lineup of companies and institutions are beginning to put billions of złotys in IT tenders up for grabs.
It may not exactly be a make-or-break year for the company, but a lot of much-needed cash is riding on its sales pitches and negotiations in the coming months.
Despite the fact that a mass of companies slashed IT spending last year, which penalised ComputerLand with a 40% year-on-year profit decline, market watchers expect state-owned companies, institutions and health services firms to begin seeking IT services suppliers.
Also, analysts expect that both ComputerLand and Prokom will each get at least some portion of the tender pie since they are the only two viable local IT players.
Already well-versed on the failing of the economy over the last two years - and its effects on IT companies - Michał Danielewski, co-chief executive of ComputerLand, feels a sense of imminence in his business strategy.
"This is our biggest chance in the last five years," he said.
One such opportunity is to supply PKO BP with a centralised IT system and services. Proceeds from the project, estimated at about €239 million (zł. 1 billion), would be almost double ComputerLand's €120.2 million (zł. 502.3 million) in revenue for 2002.
At the same time, ComputerLand is jousting for insurer PZU's IT system tender as well as offset projects from the government's purchase of aircraft fighters from American defence contractor Lockheed Martin. ComputerLand is also placing a bid for Tetra, the mobile radio communications for the government, police and rescue services.
"There are a lot of big projects which will be decided in the next six months; that's a really big chance for ComputerLand," Danielewski said.
Still, ComputerLand's profit fall, a reflection of the country's economy, caught even market-vigilant stock analysts off guard.
"It was below our expectations for 2002," said Przemysław Sawala-Uryasz, analyst at BM WBK. Subsequently, BM WBK downgraded ComputerLand stock from "hold" to "reduce."
Sawala-Uryasz also recognises the abundance of IT tenders expected to be held this year. There's at least two in the banking and finance sector, five in the public sector - a result of offset agreements - three in telecom, and one in health, according to ComputerLand. But the analyst noted that there are many uncertainties that could delay or even permanently sideline these tenders. For this reason, among others, he is not very optimistic about ComputerLand's first half results for 2003.
"We point to a weak beginning for 2003, at least the first half," Sawala-Uryasz said. "Assuming ComputerLand will get the orders, it will pick up in the second half."
And he explained that even if a number of the tenders, such as for PKO, are awarded in the middle of the year as expected, there will inevitably be a delay before money changes hands.
That's why, he said, WBK expects the company's 2003 revenues to grow only from €120.2 million (zł. 502 million) to roughly €138.8 million (zł. 580 million).
Sawala-Uryasz attributes any increase in revenues to improvements in two of the company's target sectors, healthcare and public administration, which trimmed IT spending last year. But analysts expect them to increase this year.
Though confident, Danielewski is definitely aware of the variables of timing, and certainty for the tenders which hold so much promise. Should they not come to fruition as expected, he said, ComputerLand would rely on its sustaining resource that most local IT companies lack: cash.
But is there enough cash on hand to weather another 2002?
"Yes, I think we can," Danielewski said. "We have €36 million (zł. 150 million) in he bank. So first we have a lot of cash. Our revenues were down only 4%. We managed to make €120 million (zł. 500 million) last year."
He also explained that the reason for the precipitous drop in profits, as opposed to revenues, was spending some €9.3 million (zł. 39 million) to prepare for this year's tenders.
"At the same time, however, we believe that our revenues could be much higher," Danielewski said. "What happened? It's clear we have an extremely weak public sector. At the same moment the recession touched really considerably."
He added, too, that the global economic retrenchment did not reflect operations within the company.
"But at the same time we are in the middle of so many contracts," Danielewski said. "We are in the middle of the biggest contracts of our history. On sector analysis only last year we spent €9.3 million (zł. 39 million) on getting ready for big projects. All those projects are really important in our order backlog."
Danielewski reiterated how crucial this year will be for the company: "We cannot afford any mistakes. We are prepared for those projects."
But for all his confidence, he said that he does not see destiny smiling on most local IT companies. While international players, such as IBM, Hewlett-Packard and Accenture, will thrive through direct and partnership agreements, smaller players are more vulnerable.
"I don't want to say that I am really sure that this year people will start spending," he said, "because I cannot see any significant signs that it will happen. Unemployment is going up. I don't think that this will be a good year for IT."
There is some potential for only a handful of local players.
"But it could be a good year for my company and my shareholders," Danielewski added. "They will be looking at my order backlog at the end of this year and they will ask me, 'What projects that you promised me are in your pocket?' "
He said he believes shareholders will be pleased, even as analysts, such as Sawala-Uryasz, admit that with contracts from the government - especially when offsets are involved - and banks there are "big variables."
It may not exactly be a make-or-break year for the company, but a lot of much-needed cash is riding on its sales pitches and negotiations in the coming months.
Despite the fact that a mass of companies slashed IT spending last year, which penalised ComputerLand with a 40% year-on-year profit decline, market watchers expect state-owned companies, institutions and health services firms to begin seeking IT services suppliers.
Also, analysts expect that both ComputerLand and Prokom will each get at least some portion of the tender pie since they are the only two viable local IT players.
Already well-versed on the failing of the economy over the last two years - and its effects on IT companies - Michał Danielewski, co-chief executive of ComputerLand, feels a sense of imminence in his business strategy.
"This is our biggest chance in the last five years," he said.
One such opportunity is to supply PKO BP with a centralised IT system and services. Proceeds from the project, estimated at about €239 million (zł. 1 billion), would be almost double ComputerLand's €120.2 million (zł. 502.3 million) in revenue for 2002.
At the same time, ComputerLand is jousting for insurer PZU's IT system tender as well as offset projects from the government's purchase of aircraft fighters from American defence contractor Lockheed Martin. ComputerLand is also placing a bid for Tetra, the mobile radio communications for the government, police and rescue services.
"There are a lot of big projects which will be decided in the next six months; that's a really big chance for ComputerLand," Danielewski said.
Still, ComputerLand's profit fall, a reflection of the country's economy, caught even market-vigilant stock analysts off guard.
"It was below our expectations for 2002," said Przemysław Sawala-Uryasz, analyst at BM WBK. Subsequently, BM WBK downgraded ComputerLand stock from "hold" to "reduce."
Sawala-Uryasz also recognises the abundance of IT tenders expected to be held this year. There's at least two in the banking and finance sector, five in the public sector - a result of offset agreements - three in telecom, and one in health, according to ComputerLand. But the analyst noted that there are many uncertainties that could delay or even permanently sideline these tenders. For this reason, among others, he is not very optimistic about ComputerLand's first half results for 2003.
"We point to a weak beginning for 2003, at least the first half," Sawala-Uryasz said. "Assuming ComputerLand will get the orders, it will pick up in the second half."
And he explained that even if a number of the tenders, such as for PKO, are awarded in the middle of the year as expected, there will inevitably be a delay before money changes hands.
That's why, he said, WBK expects the company's 2003 revenues to grow only from €120.2 million (zł. 502 million) to roughly €138.8 million (zł. 580 million).
Sawala-Uryasz attributes any increase in revenues to improvements in two of the company's target sectors, healthcare and public administration, which trimmed IT spending last year. But analysts expect them to increase this year.
Though confident, Danielewski is definitely aware of the variables of timing, and certainty for the tenders which hold so much promise. Should they not come to fruition as expected, he said, ComputerLand would rely on its sustaining resource that most local IT companies lack: cash.
But is there enough cash on hand to weather another 2002?
"Yes, I think we can," Danielewski said. "We have €36 million (zł. 150 million) in he bank. So first we have a lot of cash. Our revenues were down only 4%. We managed to make €120 million (zł. 500 million) last year."
He also explained that the reason for the precipitous drop in profits, as opposed to revenues, was spending some €9.3 million (zł. 39 million) to prepare for this year's tenders.
"At the same time, however, we believe that our revenues could be much higher," Danielewski said. "What happened? It's clear we have an extremely weak public sector. At the same moment the recession touched really considerably."
He added, too, that the global economic retrenchment did not reflect operations within the company.
"But at the same time we are in the middle of so many contracts," Danielewski said. "We are in the middle of the biggest contracts of our history. On sector analysis only last year we spent €9.3 million (zł. 39 million) on getting ready for big projects. All those projects are really important in our order backlog."
Danielewski reiterated how crucial this year will be for the company: "We cannot afford any mistakes. We are prepared for those projects."
But for all his confidence, he said that he does not see destiny smiling on most local IT companies. While international players, such as IBM, Hewlett-Packard and Accenture, will thrive through direct and partnership agreements, smaller players are more vulnerable.
"I don't want to say that I am really sure that this year people will start spending," he said, "because I cannot see any significant signs that it will happen. Unemployment is going up. I don't think that this will be a good year for IT."
There is some potential for only a handful of local players.
"But it could be a good year for my company and my shareholders," Danielewski added. "They will be looking at my order backlog at the end of this year and they will ask me, 'What projects that you promised me are in your pocket?' "
He said he believes shareholders will be pleased, even as analysts, such as Sawala-Uryasz, admit that with contracts from the government - especially when offsets are involved - and banks there are "big variables."
