Tech boom at NTT
NTT System's debut on the WSE at the beginning of April is expected to enable the company, a producer of computer hardware, to implement its strategy to ambitiously expand its current output of 200,000 units.
The company plans to offer 11 million C-series shares, which will account for 20 percent of the total initial capital. President Tadeusz Kurek and deputy chairman of the supervisory board Davinder Singh Loomba will each maintain a 23.89-percent stake, while deputy president Andrzej Kurek is to have an 18.07-percent stake. None of the three founders of the company intends to sell their shares and are, in fact, interested in acquiring part of the shares of the IPO themselves.
Investors will be able to subscribe for these between March 21-26 at a share price set between zł.3.50-5, which means that the value of the offer will range from zł.38.5-55 million. The company expects to obtain around zł.48 million from the IPO.
"The funds will enable us to strengthen our position on the domestic market and significantly increase our export to EU countries," says Tadeusz Kurek, president of NTT System. Some zł.20 million of the acquired money will be spent on the construction of a new plant, to be completed by the end of the year, and another zł.11 million for a logistics center to open the following year.
Expanding production
NTT System will start to assemble computer parts for Western producers in addition to the primary output at its plant in Zakręt, on the outskirts of Warsaw. "The margin on such services is lower than on assembling complete computers, but we don't want production lines to fall idle," says Kurek. Last year, NTT System sold 168,000 computers and its president does not expect production to increase more than two-fold this year because the market can't absorb more.
Tadeusz Kurek says that the construction of a new plant will facilitate expansion and increase production output to over a million computers annually, but plans for this year remain modest. "The plan for this year is 200,000 desktops, although we would like to sell 220,000," says Kurek.
Meeting the market
According to the International Data Corporation, over 2.3 million computers were sold in Poland last year, the value of which amounted to around $2.2 (zł.6.5) billion. In contrast, in 2001 the value of computer sales was just under $1 (zł.2.917) million.
"In 2006, the number of computers used in Poland was up to 6.8 million. In 2010, the number will grow to 10.7 million. [Use of] desktop units and servers will grow by 28 and 35 percent, respectively," posits Aleksander El Mahdi, an associate analyst at IDC Polska. According to El Mahdi, the most dynamic change will be observed in the growth of laptop sales, which will increase by some 16.3 percent a year.
Laptops currently account for only 3.2 percent of NTT System's production. "Within the next three years we want laptops to constitute 50 percent of production," says the firm's president. The company will also focus on the profitability of servers and other tech products.
The year ahead
According to El Mahdi, Polish-made computers are usually chosen in public-sector tenders because of lower prices. Tadeusz Kurek sees hope that this year will be good for public tenders. "In 2007, a number of tenders need to be completed. Otherwise, money will be lost," he says.
Remigiusz Sopel, an analyst from IDM SA confirms the probability of NTT System's benefiting from public-sector orders. "Apart from that, the company may see its highest number of orders from SMEs. Thanks to the influx of EU structural funds, [this sector] will rise even more," says Sopel.
Wacław Iszkowski, president of the Polish Chamber of Information Technology and Telecommunications (PIIT), says that private citizens, especially those living in rural areas, are also likely to buy more computers.
"The saturation of the internet on the Polish market has reached some 30 percent and will continue to grow. Within the next four years Poland will see further economic growth and Poles will have more money. In addition, internet will be cheaper and more accessible. People will be motivated to replace old computers or, if they have none, to buy one," adds Iszkowski.
Going west
Currently, some 94 percent of NTT System's production is restricted to the local market. The company sells some 44 percent of the remainder to Benelux countries and 26 percent to Great Britain, and wants to increase exports significantly.
IDM's Sopel says export growth is a golden opportunity for the company. "They already have experience and if they can match that with value-added services, they will be successful," says Sopel. By the end of 2007, NTT plans to extend its electronic-distribution channel for individual clients. "We assume that we will use it to sell some 20-30 percent of our products," says Jerzy Rey, chairman of NTT's supervisory board. NTT System intends to increase its net profit by nearly double this year over last year's figure of zł.8.09 million, with revenues of zł.527 million. The prognosis for 2007 puts the company's projected net profit at zł.14.6 million, with revenues of zł.670 million.
