Big IT firms take a hit on Kiwi front

Microsoft NZ's 28 per cent drop in net profit is part of a mixed bag of results from technology subsidiaries. Photo / Herald Graphic

New Zealand divisions of some of the world's largest IT companies, including Microsoft, took big hits last year, a review of accounts filed with the Companies Office shows.

A Business Herald survey of annual financial statements filed by New Zealand subsidiaries of global technology businesses reveals a mixed bag of financial performances during a time when the impact of the global financial crisis was at its most severe.

Microsoft New Zealand, which quietly filed its annual return for the 12 months to June 30 three days before Christmas, reported a 28 per cent drop in net profit to $4.7 million. Revenue was down 1 per cent to $67.8 million.

The local arm of the world's largest software company underwent a restructuring last year, following the lead of its United States parent which laid off several thousand members of its global workforce during 2009, the first significant redundancy round since the company was founded in 1975.

Announcing its worldwide full-year results, Microsoft said its business had been stung by weakness in the world market for PCs and servers.

During its 2008-09 financial year Microsoft launched a worldwide cost-cutting programme, spearheaded by the company's then chief financial officer, New Zealander Chris Liddell, who managed to shave US$750 million off operating expenses.

The company's New Zealand business' financial statements show it cut its marketing expenses from $12.1 million in the 2007-08 year to $9.7 million last year.

But its administrative expenses jumped from $38.9 million to $43.7 million, driven largely by rises in pay and other staffing costs.

Major server company Sun Microsystems said its New Zealand sales fell 8 per cent in the year to June 30. Its bottom-line result also dipped into the red, with the company turning in a $300,000 loss compared with a $3.8 million profit for the 2008-09 year.

Sun, which is in the process of being acquired by Oracle, has had several rounds of major lay-offs internationally as it has grappled to turn around its poor financial performance over the past several years.

Globally, sales from Sun's biggest revenue stream, its server and data storage products, fell 22 per cent in the 2008-09 year. The company blamed the downturn which led to its business customers scaling back, delaying or cancelling IT projects and spending.

Business software giant Oracle suffered a 28 per cent drop in profit to $14.7 million, according to its latest Companies Office filing.

But sales grew by almost 4 per cent in the year to May 31.

The global IT company reporting the biggest sales slump in the local market over the past quarter was technology and management consulting firm Accenture, which, like Microsoft, filed its annual report just before Christmas.

Accenture's accounts show its revenues for the year to August 31 fell 30 per cent, to $6.8 million. Despite the sharp drop in local sales, Accenture managed to notch up a $1.9 million net profit for the 12-month period, a turn-around on the $290,000 loss it reported for the previous year.

The Accenture brand is best recognised outside IT circles for its sponsorship of golfer Tiger Woods. Last month Accenture became the first major business to sever its sponsorship ties with the sportsman after he became embroiled in a sex scandal.

While many have found conditions tough, some big IT brands managed to increase their New Zealand sales and profit.

Security company Symantec, which sells its software to both consumer and business customers, managed to boost New Zealand sales by almost 7 per cent, to $10.8 million, in the year to March 31, doubling its profit to just under $400,000.

The big success story for an overseas-controlled IT company reporting its results over the past quarter was Auckland-based computer touch-screen technology firm NextWindow.

Parent company Next Holdings, owned by shareholders in Auckland, Australia, Singapore and Bahrain, reported a five-fold rise in sales to US$31.8 million for the year to March 31. Its US$2.4 million profit contrasted with a US$4.8 million loss in the previous 12 months.