Blinkx share issue as revenues grow but losses mount

(By Philip Carnelley, Nov 3 2009, 17:30 - updated Nov 4, 08:00)
AIM-listed video search engine company (and Autonomy spin-off) Blinkx has reported sharply increased revenues for the 6 months to 30 September, together with a share placing raising £5m. Autonomy – which remains Blinkx’s largest shareholder, with 19% before the placing – underwrote the issue and took some of the shares. It's not yet announced how much Autonomy took.

For the half year, reported revenue rose 106% yoy, to $13m, and usage grew dramatically with a 238% increase in advertising campaigns over the previous half; video streams increased by 170% and the company entered the “Top 10 Video Sites” measured by comScore and Neilsen. But operating losses widened from $4.3m to $7.4m, and cash burn rose from $4.7m to $8m - hence the need for the placing. That sum does include $1.4m of infrastructure investment. Blinkx shareholders have seen pretty poor returns since the 2007 IPO: the shares have never regained their price of 65p reached immediately post-launch, and fell 10% on the day's news to 17.5p. Perhaps shareholders' best hope is that the company will soon be bought!

TechMarketView setting the agenda

(By Richard Holway 7.00am Wed 4th Nov 09) TechMarketView is still less than a year old but we are really delighted with its progress. In particular, how TechMarketView has become an 'Agenda setter' - indeed just like we were with the Holway Report.

The first report in our new SoftwareViews research stream - on the State of the UK HQed Software Industry - has created great press coverage and favourable comment.

I was particularly pleased that BusinessWeek used the report as a basis for their weekly CIO debate. The article was under the headline Why the UK will never create a software giant to rival Microsoft, Google or Oracle "That's the sobering conclusion of the silicon.com CIO Jury which voted 10 to two against, when asked whether the UK could create a global software business to rival the technology industry's most powerful companies."

It's a really good read - I commend you to it.

TCS breaks into UK local government

(By Tola Sargeant, Tuesday 3 November 2009, 16:30) Offshore SITS supplier Tata Consultancy Services (TCS) has won its first contract in Local Government in the UK. In what is a landmark deal for offshore players in the traditionally conservative local government sector, Cardiff Council has chosen TCS to help drive the Council’s Strategic Transformational Change Programme. The Indian player will support the Council’s ICT Service “to help deliver more efficient systems and ensure both parties benefit from an exchange of knowledge and experience”. TCS beat IBM and BT to the deal, which is rumoured to be worth £150m over 15 years.

This deal is interesting on many levels. For TCS it is a fantastic win and vindication of its concerted efforts to woo the UK public sector over recent years. The contract follows TCS’ success at the UK’s Child Maintenance and Enforcement Commission back in April (see TCS wins Child Maintenance Enforcement contract) and is surely evidence that areas of the UK public sector – even local government - are now willing to engage directly with offshore suppliers despite the risks of a political backlash.

Indeed, as we’ve said before, we wouldn’t be surprised to see more public sector organisations turning to lower cost offshore providers as spending cuts begin to bite. Cardiff Council Leader Rodney Berman’s comments on the TCS contract award were interesting in this respect. He said: "It is clear that the public sector needs to adapt to the changing world around us to ensure we are equipped to deal with the effect of the recent global recession and the ongoing squeeze on the funding that is available for spending on public services.”

That said, this contract is about more than labour arbitrage. Cardiff is at pains to stress that no Council staff will be transferred to the private sector, and it clearly values TCS’s onshore abilities and global public sector experience. TCS is particularly strong in local government in India, where its systems support populations larger than that of the whole UK.

All in all, this is great news for TCS and, if the contract is successful, potentially a fantastic entree into the UK local government market.

Cognizant reports record growth in Q3

(By Tola Sargeant, Tuesday 3 November 2009, 15:30) New Jersey-headquartered, India-based SI Cognizant has revealed a very strong set of Q3 figures and raised its guidance for FY2009. Quarterly revenue rose to $853.5m, up an impressive 16% from the year-ago quarter and 10% sequentially as the volume of business (rather than prices) increased. In fact, the sequential revenue increase of $76.9m was the highest in the company’s history. Profits were also up: GAAP net income was $136.6m, compared to $112.8m in Q308, and the non-GAAP operating margin was 20.2%, above the company's targeted 19-20% range.

Thanks to fairly broad-based growth across all horizontals, verticals and geographies, Cognizant now expects FY09 revenue to be at least $3.25b, up 15.5% or more compared to 2008 and ahead of equity analysts’ previous consensus estimate of $3.16b. Areas of particular growth in the quarter include the banking and financial services sector (which has stabilised and returned to growth – up 9.5% sequentially); retail (+15% sequentially) and Infrastructure Management and BPO (up 18% sequentially on a combined basis).

Like other Indian players, Cognizant appears to be benefiting from the global economic slowdown and claims more clients are thinking about offshore and optimising their offshore processes as a result. Interestingly, however, Cognizant has seen conversations with its clients broaden beyond cost and labour arbitrage to include discussions about how the Indian-based player can help them improve their business processes and innovate. These increasingly strategic conversations with clients are bringing it more into competition with traditional consulting and SI firms, as well as its Indian peers.

Going into 2010, Cognizant is assuming customers’ budgets will be ‘flat to slightly up’ and is not expecting a repeat of the record growth it has seen in Q3. Nevertheless, the company will be looking at opportunities to promote non-linear growth by developing more transaction and outcome-based pricing models across its horizontal and vertical businesses. It is also still open to small ‘tuck under’ acquisitions like the purchase of UBS’ captive Indian service centre announced in October (see Cognizant snares UBS captive).

November NHS IT deadline draws near for CSC and BT

(By Tola Sargeant, Tuesday 3 November, 10.00am) It has been a pretty depressing week for followers of NHS IT in the UK. Back in April, the Department of Health’s director general of informatics, Christine Connelly, set an end of November 2009 deadline for ‘significant’ progress from the National Programme for IT in the NHS’ (NPfIT’s) remaining Local Service Providers (LSPs) BT and CSC. But as that deadline draws nearer, we learn that CSC’s make or break deployment of iSoft’s Lorenzo software at NHS Bury is behind schedule and, perhaps more worryingly, that there are only about 174 ‘regular users’ of Lorenzo across the five NHS trusts that are already using early versions of the system. We’ve no word yet on how BT is performing against its milestones in London.

The figures on Lorenzo usage were released by health minister Mike O’Brien last week in response to an MP’s question and relate to Release 1 of the software, which provides limited clinical tools on top of an existing patient administration system (PAS). They clearly show deployments to date have been restricted to specific areas of a small number of hospitals – indeed the highest recorded number of concurrent users of the software is just 19.

At the moment, it is hard to argue that the c£3b of contracts that CSC has with the Department of Health (DoH), the earliest dating back to 2003, are providing value for money on a per user basis! For the contracts to be considered a success usage would need to be in the tens of thousands. In CSC’s defence, usage should improve significantly if the fuller version of Lorenzo (Release 1.9), which includes a PAS, is successfully deployed, first at NHS Bury and then at the big acute Trust Morecambe Bay, which would have thousands of staff using Lorenzo.

But according to Board papers at NHS Bury - the strategic Lorenzo deployment against which LSP CSC will be judged in relation to the November deadline – the Trust has missed its initial planned go-live date of 26th October. The Trust claims, however, that it is still on track to deploy Lorenzo R1.9 before the end of November. CSC, and the DoH, will be hoping this is indeed the case.

It is still not clear what would happen if CSC and BT fail to make ‘significant’ progress by the November deadline. One possible option is the extension of the local procurement model being used in the South of England following Fujitsu’s departure from the Programme (see NHS IT Localisation: A world of opportunity), which would inevitably lead to further delays as fresh procurements are organised.

As a footnote, we were sad to note that maternity systems supplier EuroKing Miracle looks set to be liquidated next week. EuroKing’s software has proved popular with the NHS and no doubt the company will be missed.

Microgen sells billing services division as trading improves

(By Philip Carnelley, 3 Nov 09, 09.30) Microgen reports that it has entered into a conditional agreement for Swiss Post Solutions Ltd., part of the publicly owned Swiss postal service, to buy its Billing Services Division (BSD) for £7.5m in cash. The disposal will require shareholders’ agreement, to be sought at a meeting on 30 November. BSD, at £2.9m in revenues, accounted for c18% of Microgen’s revenue and 27% of operating profit in the first half of this year. The company also said that 76% of its revenue for the first half came from software-based activities – up from 73% in the prior (full) year.

Microgen has also issued an IMS for the 3 months to Sept 30, saying that results are “ahead of the annual plan.” The company now has £17.5m of cash - before the BSD disposal, which will yield £7m after costs - including £0.8m from the disposal of 54% of the Group's shareholding in Scisys plc. The company comments that its “strong balance sheet… provides the resources to consider acquisition opportunities…”

The Power of the Apple App

(By Richard Holway 9.00pm Monday 2nd Nov 09) Anyone looking for further proof of the power of the Apple App should read Pizza Hut iPhone app generates an extra $1m sales from econsultancy.com. The app has been downloaded 1m times in three months. It allows pizzas to be ordered 'on the move'. Exactly what you want to do from your 'mobile' smartphone. Pizza Hut reckons they have generated $1m extra sales as a result.

The further uses of such 'mobile' apps are infinite. Reservations, hair appointments, taxis, flights, flowers, groceries...all the kind of things you think of on the train or wherever you are outside your home/office. Of course, if you have the Pizza Hut App installed, you are less likely to order from Burger King. This 'first mover' advantage is so powerful (as Apple knows full well) A year back I signed up for Amazon Prime 'One Click' with free next day delivery. It's just so easy that it is my first port of call for almost everything I need. Amazon.co.uk have now launched an Apple App - making my purchasing even easier!

Bluntly, the retailers I now pity are those that haven't woken up to the Apps Store.