Investment: Technology's coming home

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The Independent Online
HOW THE tables have turned. Less than two years ago every self- respecting technology company seeking a stock market listing chose Nasdaq, the US market for growth shares. American investors were more sophisticated than the Luddites in London and, crucially, the valuations were better.

Now it's the reverse. Yesterday ECSoft, an Anglo-Swedish outfit which opted for Nasdaq at the end of 1996, became the first Nasdaq company in living memory to raise money on the London Stock Exchange.

The message is simple: European investors now value technology groups - and especially IT services companies - more highly than their US counterparts. Their optimism was graphically illustrated yesterday by Logica, the IT services group, whose shares jumped 105p to a new high of 2062.5p following an upbeat trading statement.

ECSoft's move looks well timed. With Logica now trading on a multiple of 50 times this year's expected earnings, and its rivals Sema and CMG valued even more highly, the scope for further gains looks limited. So investors are more likely to turn their attention to smaller stocks which have not enjoyed the same rises as their larger peers.

ECSoft follows the same model as its larger peers, using consultancy services to win systems integration contracts, while dabbling in a bit of outsourcing work. It essentially concentrates on the telecoms, finance and retail sectors. Customers include Bass's pubs arm and the computer group Unisys. The company will keep roughly half the pounds 36m raised in the placing - venture capital group Warburg Pincus gets the rest - giving it a war chest with which to pursue acquisitions in Continental Europe.

On a multiple of about 35 times house broker Deutsche's 1998 earnings forecast, the shares, which start trading at 1807p next Wednesday, look reasonably priced. Remember, however, that this is a sector looking increasingly overheated. One bit of bad news and ECSoft's new European shareholders could find their fingers badly burned.

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