A survey by Durlacher has claimed that the small and medium enterprise (SME) market is poised to adopt the Internet and electronic commerce wholeheartedly. Nick Gibson, an Internet analyst at the City based company, said that while SMEs are far more cautious than the corporate market in their approach to the Internet, the market is set to boom. He said that a survey of 1,042 UK businesses Durlacher commissioned in May of this year showed that Internet access penetration stands at 33 per cent for small companies, and at 54 per cent for medium sized enterprises. But by next May, said Gibson, that will grow to 46 per cent of small businesses and 67 per cent of medium sized businesses. The growth, according to Gibson, is dominated by an interest in email. Of the companies surveyed, 38 per cent said email was “very important” to their business, while 28 per cent thought email was “important”. Nearly 50 per cent of the group thought that the World Wide We was important to their businesses, with the majority of those who were connected putting some type of site up in the first three months. Most of those sites, however, are purely promotional presences, although a large proportion were hoping to generate direct sales. The survey also estimated the size of the dial up market in the UK. According to Durlacher, it has grown by 84 per cent over the last 12 months and over 640 per cent since September 1995. The number of accounts has reached over two million, with the base including around 865,000 business accounts and 1,155,000 residential accounts. The leading ISP in the UK is Compuserve, with a 20 per cent market share but only 0.2 per cent growth monthly, while AOL is number two at 385,000, with 16.3 per cent monthly growth. The Microsoft Network has 130,000 users, but is growing slowly at 1.5 per cent a month, while the company with the largest monthly growth figure is BT’s Line One, at 137.5 per cent but so far only with 35,000 users.
The Japanese press has reported that Toshiba is set to cut production on 64Mbit DRAMs it produces, reducing output from 80 per cent currently to 50 per cent. The reports, from Nikkei Net, said that it will switch production from the DRAMs to Flash memory, in a bid to raise margins in its semiconductor division. However, demand for 64Mbit parts has grown over the last two months, and LG Semicon said at the beginning of this month that it was to ramp up production of the semiconductor parts. According to the reports, DRAM manufacture accounted for over 80 per cent in 1997 and Toshiba had planned to manufacture eight million 64Mbit parts during its current financial year. Toshiba will manufacture the Flash products at its Japanese plant as well as in a joint venture with IBM at Virginia.
As exclusively revealed here in The Register last week, Japanese conglomerate Kyocera is to bale out the bankrupt photocopying firm Mita. Yesterday, Kyocera’s president Kensuke Ito confirmed that his company had put together a plan to bale out Mita, which includes a restructuring and an investigation into the viability of the company, its sales force and outstanding orders for its machines. Informed sources told The Register last week that Mito and Kyocera had engaged in a joint venture at the beginning of the year. Kyocera, which makes a range of ceramic-based products, also manufactures laser printers and other optical equipment and Mita was going to use the laser engine in its own photocopying products.
Big Blue said today it has cut prices on some of its NetFinity servers. The cuts, of up to 20 per cent, are on selected models in the 5500 and 7000 range. According to Tony John, NetFinity product marketing manager at IBM UK, the cuts are in preparation for new introductions of processors by Intel next Monday. IBM will introduce its Xeon range on the 22 September, as planned, said John
Fayrewood spent nearly £50,000 on abortive acquisition costs for the year to April 1998, as well as successfully completing a number of acquisitions. The AIM-quoted computer equipment reseller made £1.45 million profit for the year, with an annualized turnover of £120 million after its acquisition of notebook and peripherals distributor Interface Solutions in May. As well as acquisition costs. Fayrewood was also hit by the strength of sterling, which knocked seven per cent off turnover. Profits at Interface Solutions are expected to be low. Fayrewood operates in a number of European countries, owning Banque Magnetique in France - which is growing strongly, aided by the buoyant French economy, according to the distributor - and ComputerLink in Germany. The Fayrewood results include five months combined with those of the German distributor. The group forecasts £3 million profits for next year.
High street software chain Electronics Boutique is expanding into Europe with plans to establish a network of 400 stores. The retailer currently has 156 stores in the UK, which its UK head, John Steinbrecher wants to push up to 200. In an article in the London Evening Standard, Steinbrecher said the Scandinavian software market would be one of the easiest to break into. “Outside the UK, the best markets are France and Germany. The easiest market for us to start in will be Scandinavia, because 80 per cent of their software is in English, which means we can shift it from here.” Last year, Electronics Boutique recorded turnover of £124 million, up from £55 million and profit of $7.9 million up from $495,000.
A book manufacturer has made a £50,000 investment in bespoke accountancy software company Fourfront. Butler and Tanner, a Somerset based company, but with offices in New York, Paris and Munich, produces 30 million books a year and has taken the share because Fourfront manufactures copyright accountancy software, and other financial offerings. David Mills, the finance manager at the book company, said that it needed to upgrade its packages for two reasons. The first, he said, was to ensure it was Year 2000 compliant but he also complained that the existing software his company used would not integrate with other of its products. He said he did not want duplication, “or even triplication” of functions on a daily basis. Fourfront has 600 users in the UK including Halifax Estate Agencies, the Fire Brigades Union, the British Horse Society and Gloucestershire Health Society.
Scottish entrepreneur Chris Lynas, of Lugton Breweries, said today that it was hard to quantify how many bottles of beer he had sold over the Internet. Lynas, who has the largest independent bottling plant in Scotland, said that his use of IBM's e-commerce software had generated international sales he would not otherwise have had. Lynas said: "Five out of the 22 small breweries in the country [Scotland] use our bottling facilities. Through the Internet, we can now supply beers across the world." He said that he had bought Netbank and other transaction functions from IBM Global Services which cost him £15 a month. "Selling direct is the way forward," he said. "People are worrying about the Euro, but there is going to be Cybercash soon." He said that people could buy, for example, a Spice Girl's album from Arizona and because the UK Customs & Excise did not expect tax on sales under £18 ($30), they could buy it far cheaper than from a UK store with everything included. He estimated the latest Spice Girl's CD would cost something like £8, including Fedex charges. But Lynas said he was unable to quantify the number of extra sales he had generated since IBM helped him out. He said he had seen one of the e-commerce adverts which had made him call IBM and that they sorted out the sophisticated programming involved. Sales of beer across the Internet was only a small part of his company's turnover, said Lugton. IBM was unable to say how many customers it had using its e-commerce software. * IBM said it doubted it would have a problem with its e-commerce logo because it had included the term "e-business" with its logo.
1998 has been a bloody year for PC manufacturers. Inventory overhang, margin pressure, plummeting prices, the Asian contagion, has ensured a nasty time is being had by almost all. the outstanding exception is of course, Dell, the Austin-Texas direct PC manufacturer, which turned in an superb set of Q2 results yesterday. By its own calculations the company accounted for half of all the growth in PC unit shipments worldwide during Q2, growing at more than six times the industry rate. Almost as impressive, it managed to hold gross margins steady, edging up slightly from 22.2 per cent last year to 22.7 this time around. PC sales were up 54 per cent, well above Wall Street expectations. European revenues rose 73 per cent – over three times that in the industry in general. The company also managed to increase its revenues in Asia by 34 per cent, at a time when many other manufacturers are blaming the region’s troubles for poor results. Dell attributed its prosperity in the territory to its direct sales model. Revenue for the three months to August 2 stood at $4.3 billion , up from $2.8 billion a year ago. Net income was $$346 million, up from $214 million in the same period last year. The Texas based computer manufacturer achieved a 72 per cent increase in earnings for the second fiscal quarter. The company said that sales via its Web site were averaging $6 million per day. Joanne Gray, UK Internet manager said that the web site was composed of a mix of new and incremental business. She said that for Dell’s larger customers, the web sales vehicle was all about simplifying the ordering process. On the back of the results, Dell announced plans for a two-for-one stock split, its second this year.
Tadpole Technology, the Cambridge based specialist workstation and mobile computer systems manufacturer is taking out the competition, by taking it over. Tadpole is buying one of its US rivals, RDI, in a $6 million reverse take over. Tadpole’s directors will retain control of the board of the new group. The deal is being funded by way of a rights issue at 10.5 pence per share on a 26 for 25 basis. This is expected to raise £5.35 million – nearly half again the necessary cash for the deal. The rest of the money will be funnelled into the companies Java software operations, and provide further working capital. RDI, a subsidiary of Trigem, competes with Tadpole in the Sun portable workstation market. The company announced losses of $1.21 million on a turnover of $13.1 million in the year to May 1998 before inventory write offs. Following shareholder approval, trading in Tadpole’s shares is expected to resume next month. They had been suspended at 18 pence a share. * Register Tadpolenote 222. One of the staffer’s entire stock of tadpoles in his garden pond was mulleted by two goldfish which obviously thought the fish food did not satify their protein needs…
Netscape Communications has broken even in its third quarter, surpassing Wall Street estimates. Revenues for the quarter ending July 31 were $150.2 million – a ten per cent increase on the $136 million of the same period last year. Net income for the quarter was $88,000 compared with a net loss of $45 million. Since Netscape began distributing its Web browser for free as it tried to maintain its market lead, the company has had to refocus on Netcenter, its new Internet gateway website, and software for business computer networks. Jim Barkdale, company president, said that the Netscape had seen “strong momentum” in both business segments. The company said a strong increase in revenues from Netcenter boosted results. The new site produced revenue of $38.7 million representing a 24 per cent increase on the second quarter. Revenues from business software and related services also gained on last quarter and were up 16 per cent at $111.6 million. The first half of the fiscal year brought revenues of $277.5 million for Netscape, up on $256.5 million a year ago. Net income rose to $96,000 compared with a net loss of $37.4 million previously.
The millennium bug could prove fatal, not just to computers but to people as well, according to MPs on the public accounts committee, and research from bug hunters at Prove It 2000. Meanwhile, John Prescott, deputy prime minister, assured the country that the government had the problem under control. MP’s on the committee said that it had found signs of slippage in the government’s campaign to stop computer crashing when the date changes, and has voiced fears that medical equipment could fail if it cannot handle the date change. “There are worrying signs that not all the public sector will be ready in time,” said chairman David Davis, a conservative MP. Prove It 2000 conducted a survey of GP’s NHS trusts, health authorities and hospitals, asking about levels of millennium readiness. The survey found that more than a third of those questioned had spent nothing on ensuring compliance, and less than half had even had budgets approved. Spending on the problem accounted for three per cent of the IT budget. “The report reveals that the NHS is massively unprepared for the year 2000. The thought that critical equipment such as operating theatres have not been tested for Year 2000 compliance chills me to the bone,” said Richard Coppel, chief executive of Prove It. The MP’s feel that there is a significant risk that medical equipment could fail, putting patients lives at risk. “We are appalled that the [medical devices agency] did not realise the potential impact of failures until late 1997,” the report says. “In our view, this delay, and the misleading advice [given] to the NHS in 1996, can only have increased the risk to patients and the costs of remedial action.” The report concludes that the Treasury must be prepared to put further funding the way of the public sector, in order to beat the bug.
US-based firm Disk/Trend expects the worldwide market for removable storage devices to hit around $3.9 billion this year and grow to in excess of $5 billion by the year 2001. Breaking the market up into five segments, magnetic rigid disk cartridge drives, PC Card rigid disk drives, floppy disk drives, small optical disk drives, and cards using flash memory technology. Demand for the different technologies is, according to Disk/Trend, dependent upon demand for devices such as digital cameras - which will drive the demand for flash memory cards. Sales of high capacity floppy drives are increasing, but there is confusion as to which flavour users should adopt - Iomega, Syquest, 120Mb LS-120 and so on - Disk/Trends claims. Other manufacturers are readying themselves to break into this market, including Sony, Swan Instruments and Caleb Technology. Disk/Trends estimates the market will grow to accommodate sales of 33.4 million of this type of drive by 2001. This growth will suppress the market for standard 3.5 inch floppy drives, although the format will be around for the foreseeable future, the research company said. Shipments of flash cards are expected to rise from 4.5 million in 1997 to 19.6 million in 2001. Magnetic rigid disk cartridges are expanding into new markets such as video editing and multimedia mastering as the technology improves to give higher capacities at lower prices. One sector of the market expected to suffer over the next three years is the market for PC Card drives. Disk/Trends claims the market for PDAs and other sub-notebook devices has turned out to be significantly smaller than had been expected and this will impact on the PC Card drive manufacturers.
Following its third quarter results showing its slimmest growth for years, Hewlett-Packard says it may have to cut jobs in the Asia Pacific region. This announcement casts doubt on the safety of over 25,000 jobs throughout Asia in 74 sales offices and 18 manufacturing plants. Richard Warmington, MD of HP's Asian operations, said that the company would resist making sweeping cuts as high tech talent in Asia is in short supply. The final decision over the cuts will be made in the next six weeks, and will particularly affect Southeast Asia, the company said. The company has taken a series of cost cutting decisions in the last year. Hiring has been put on hold, travel budgets have been shrunk, senior managers have taken pay cuts, and earlier this year, employees were asked to take a five day holiday. Warmington said that the industry could expect to see more of the same. .
UK-based chip distributor Memec Group has signed a pan-European agreement with Intel to handle the processor giant's embedded controller and flash memory products. Memec, which was established in 1974 and operates in 36 countries worldwide, will distribute the Intel products in all 12 of its European territories; in the UK, Thame Components will carry the Intel kit. In an article published in Electronics Weekly, Memec chairman and CEO, Dick Skipworth, said: "We have been looking to add a strong processor line." Intel's embedded Pentium chips, i960 and StrongArm processors, flash memory, networking and interface devices and the Chips & Technologies graphics products acquired by Intel, are all covered by the deal. "Intel was looking for the focus we can offer," Skipworth said. "In addition we have a demand creation strategy and an excellent technology support and service base." Memec also has 26 field engineers across Europe whose work will also be part of the deal. Memec has said these engineers are focused on Intel product and that as it increases Intel related business the number of engineers will also grow. Memec will not hold Intel stock, instead this will come from Munich-based Atlas Services, the logistics arm of Veba Electronics, Memec group's parent company.
Despite the heat of summer, direct PC vendors are already preparing their Christmas campaigns. Q4 this year is likely to be particularly busy in the consumer market as PCs with DVD drives will be widely available for the first time. DVD drives - despite being labelled as "gimmicky" by a number of retailers - are set to appeal to consumer users that want to be first with everything, and are expected to boost sales. Walthamstow-based direct vendor Simply Computers is hiring 20 new sales staff, and created a dedicated sales unit for small businesses as it prepares for high consumer demand for DVD-drive PCs. "Within the next six to nine months the CD-ROM drive will disappear and be replaced by DVD drives on new PCs," said Simply Computers product manager Mark Abery. "DVD drives will then sell at the same price that CD-ROMs did." Simply Computers is issuing its small business customers a separate phone number to order, fearing that phone lines might be swamped by consumer customers in Q4. It also claims that 10 per cent of its total sales are done end-to-end over the Internet. Also gearing up is Time Computers, which is mid-way through a three-week national TV advertising campaign. The campaign, the second by Time, aims to build brand awareness before the consumer-buying season begins. National sales manager Colin Silcock said that the vendor - which also has nationwide showrooms - would use focus groups to see if the adverts worked before deciding on whether to continue with TV advertising.
Compaq and SCO have announced a reseller recruitment, training and certification programme aimed at boosting sales of UnixWare NonStop Clusters. The programme, which is rolled-out in Europe this quarter, is designed to certify current Compaq and SCO Vars and distributors to sell UnixWare NonStop Clusters on Compaq servers. The scheme, which aims to boost sales of the clustered operating environment into large enterprises, is being funded jointly by the two vendors. "We saw a huge opportunity for UnixWare NonStop clusters that required a bold take-to-market plan," said SCO's senior vice president of marketing Ray Anderson. "We want to aggressively pursue a broader market." Clustering technologies have previously been used only by large telecom-type customers, but vendors are keen to develop the market, selling into other areas where customers need scalable platforms. Under the programme, European Vars and distributors, currently certified by both SCO and Compaq, can become certified UnixWare NonStop Cluster resellers. Certified resellers will receive extensive training in product installation, service and support according to the vendors. Distributor Ingram Micro welcomed the move to develop a framework for the clustering channel. "We look forward to driving the reseller initiative," said director of Unix marketing David Ochser.
An outstanding patent dispute between rival graphics emulation companies could be brought to an abrupt halt by an unexpected acquisition. Mentor Graphics shocked market watchers by launching a hostile takeover bid for Quickturn Design, the market leader in the emulation market. Mentor has offered to pay Quickturn shareholders $12.125 per share of outstanding Quickturn stock in a cash deal valued at $216 million. The bid is being seen as particularly generous, as it is well above market value - last year Quickturn's returned a loss of $5.3 million on sales of $110 million. But even if Mentor is successful in its hostile takeover bid, some pundits think that is when its troubles will really begin. John Barr, managing director of US based analysts Needham and Co,said: "Quickturn's business over the next two quarters is going to get hit real bad. And then, assuming Mentor succeeds, the Quickturn part of Mentor will also get hit hard and will be dilutive in terms of earnings per share." Barr said that by the time things improved it could be too late for Mentor to benefit significantly: "By the third or fourth quarter Mentor will start to realise some of the synergies simply because the revenues are under control. Whether or not they will be able to grow the business from there remains to be seen." Quickturn's board has until 26 August to make recommendations to its shareholders. Mentor already owns around four per cent of its rival. Bernd Braune, senior vice president at Mentor was putting on a positive air: "I believe it will be a friendly co-operation. We feel our offer is fair to the shareholders." He continued: "Customers think both companies should stop the litigation." The litigation has resulted in Mentor being barred from selling its Celaro emulation tool in the US, relying on sales from Europe and Asia.
Microsoft has turned down bids from two of the UK's largest distributors to be allowed to sell OEM software. Both CHS and Computer 2000 had applied to become MS OEM product distributors, but Microsoft has turned them down after smaller OEM distributors complained. Microsoft currently has five OEM distributors - Actebis, Datrontech, Enta, Ideal and Osmosis - who sell product to system builders. Both CHS and C2000 have to go through one of them if they want to source OEM product. Both of the large broad-line distributors, which already sell Microsoft end-user product, argued that dealers should be able to get all Microsoft product from just one distributor. "We choose our OEM distributors because of their expertise in the system builder market," said Microsoft OEM channel sales manager Des O'Carroll. "The bigger distributors are now getting into that area." But Carroll said that he was concerned that the larger distributors would not be able to increase sales to system builders and risked ending up taking existing sales from other distributors. CHS marketing director Peter Rigby said that the distributor wanted to expand its Microsoft OEM business but could not do that until it got authorization. "We are not putting large resources into selling Microsoft OEM product at the moment. To take it to the next level we need to make an investment, and we will only do that if we get authorisation," he said.