Tech cos embracing change ahead of EU membership
In January 2001, the Polish IT company was highly touted as the first Internet portal to list on the Warsaw Stock Exchange (WSE). Whereas U.S. Nasdaq Internet share prices had already plummeted about 85% by that time, Interia.pl seemed promising in Poland's relatively new environment for tech stocks.
The Kraków-based company priced its initial public offering at zł. 24 a share. Today the stock is trading at zł. 3, while the company, which has yet to reach profitability, is now kicking around a new business plan.
"A portal site is a hard business," said Grzegorz Wójcik, the vice president of Interia. "We can survive. (But) if we want to survive we have to work on the business model."
Interia's depressed share price is not unlike the share prices of other IT companies listed on the WSE's SiTech listing for tech issues and TechWIG index, which have forced companies like Interia to rethink and diversify their strategies.
Last Wednesday, the TechWIG index closed at 336.72 - a significant drop from last year's average of 590.21 and the index's peak year in 2000, when its average was 1,456.9.
Talex, a Poznań-based IT systems integrator, is in a situation similar to Interia's, as it too is planning to a shift and diversify its business model to stay afloat in the tough tech sector and prop up its share price.
"We (only) have one big partner," said Rafał Wałkowski, the director of Talex, a SiTech-listed company, whose shares trade at zł. 9.80. That partner supplies 90% of the firm's revenue. Even though Talex's revenues are stable, such a concentrated business model today would hardly allow any company to enter any stock exchange, analysts said.
Public investors have a tougher record these days.
Even for listed companies that still make the headlines, investors have shown little interest in them.
"We used to cover ComputerLand and Softbank, but there was less interest from our clients," said Tomasz Bardziłowski, an analyst at the Warsaw office of Credit Suisse First Boston (CSFB), an investment bank. He said that as a result, CSFB had ceased publishing reports on these companies.
The only pure IT company Bardziłowski said he now analyzes is Prokom, which trades at zł. 101.5 a share.
On a positive note, CSFB upgraded its rating on the software giant. Bardziłowski said that most of the negative characteristics of the company had already been reflected in its share price. In a CSFB report, the company said that Prokom would be "underpinned by an expected recovery in IT demand in Poland, which should be fueled by infrastructure upgrades related to European Union accession."
As for Interia, Wójcik said that the company's business model was based on advertising and electronic-commerce.
"The other part is IT integration," he said. "We have many solutions that we might consider (for) IT. We have started to change our business model (and) plan to break even in the last part of 2003.
And unless Polish companies change with the times, they will inevitably be gobbled up by their bigger competitors.
"Consolidation will occur," Bardziłowski said. "Look at the European Union - to be competitive you have to have bigger scale."
