Battered tech firms on brink

By PETER GRIFFIN

New Zealand's fragile cluster of listed technology companies will be holding its breath tonight as markets open for the first time in the United States after last week's terrorist attacks.

But little air may be left in the lungs of some struggling companies, plagued with plunging share prices long before the chaos of last week.

With the financial reporting season at a close, the local tech sector has delivered full and half-year losses combined of around $160 million.

The losses and writedowns of private IT companies and those listed on foreign exchanges are likely to push that figure even higher.

Though American markets remained inactive last week, stock prices locally took a hammering as the reverberation of events in the US shattered investor confidence.

Big tech-sector losers for the week included Advantage Group, which shed 17 per cent of its share value.

Software of Excellence also dropped 17 per cent and IT Capital finished down 11 per cent. Technology company Wellington Drive dropped 26 per cent to finish at 40c.

Bruce McKay, head of research at broking firm DF Mainland, said 1000 points had been knocked off the firm's technology index since March.

The index dropped 350 points last week alone to close at 3892 - 28 per cent down for the year.

"It was already a soft market, but last week was a twist of the knife," said Mr McKay. "Stocks like Telecom are driven very much by off-shore sentiment. If that is weak, we get hit."

Of the 23 stocks on DF Mainland's technology index, 18 ended the week down, with just three stocks making small gains.

While most tech companies have spilled their fair share of red ink in the past year, a handful have contributed a lot to the total deficit.

Advantage Group was hit by a $60 million write-off of goodwill, leaving it $65.8 million in the red. Sky TV added $42.3 million and IT Capital contributed $5 million.

On Thursday, telecoms software company Commsoft reported a loss for the year to June of $21.7 million on revenues of just $4.6 million.

"A lot of our problems have been self-inflicted," said Mark Lunt, Commsoft's group managing director, who took the reins in April. "There's been a lot of things we haven't managed as well as we should have."

Mr Lunt said staff numbers had been trimmed from 130 to 80 and expenses had been slashed to keep the company afloat.

Mr McKay pointed to dental software company Software of Excellence as one company that had bucked the trend.

"They've stuck to their knitting and captured the market in terms of being one of the few good companies out there at the moment," he said.

Vending Machine company Vending Technologies, which posted a profit of more than $4 million for the year to June, is another in the relatively exclusive "profit club".

Others include GDC Communications, tech investor Strathmore Group and computer distributor Renaissance.

Telecom dwarfed the rest with its reported profit for the year of $643 million, but that brought little comfort as it was down from last year's profit of $783 million.

Across the Tasman, IT companies also seem to be swimming in red ink.

On Thursday Melbourne-based e-commerce provider M2M joined the long list of Australian tech companies reporting considerable losses, finishing the year to June $A17.5 million in the red.

But that was a mere drop in the bucket compared with the $A120 million full-year loss posted by second-tier telecommunications company Davnet.

Meanwhile, Nasdaq-listed LookSmart, the once high-flying internet directory company, finished $US38.3 million in the red.

Both LookSmart and Brocker Technology, New Zealand's sole tech companies on the Nasdaq, face delistings if they do not push their shares above the $US1 limit.

Brocker, which last month reported a loss of $C19.3 million for the year to March, has already completed a four-for-one share consolidation to boost its share price.

The tactic was to no avail, with the shares slipping back down to around the 50USc mark.

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