Guardian IT joins tech wrecks as warning halves share price

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The Independent Online

Guardian IT, a disaster recovery business, saw its market value halve yesterday to £143m after a surprise profits alert on what was another miserable day for the technology sector.

Fellow technology group and provider of e-commerce software, Kewill Systems, had £20m knocked off its market capitalisation after it warned that economic conditions were having a severe impact on trading, forcing it to cut 13 per cent of its workforce.

A 3 per cent slide on Nasdaq overnight on Wednesday, which pushed the US tech index beneath the key 2,000 points level, combined with gloomy comments from Cisco, the US networking giant, earlier this week left their mark on the sector.

Telecoms equipment makers Spirent and Marconi fell 5.6 per cent and 2.7 per cent respectively. Sage, an accounting software firm, lost 5.6 per cent, Logica, an IT services company, fell 5.4 per cent while ARM Holdings, a chip designer, fell 2.7 per cent.

The shockwaves were felt across Europe. Nokia, the Finnish mobile phone giant, lost 7 per cent, rival Ericsson was down 2.8 per cent while Alcatel, a French telecoms equipment firm fell 7.6 per cent.

Guardian iT said conditions in the web hosting market had "materially worsened" while sales in its City-based core disaster recovery business were being postponed. The stock finished down 49.4 per cent at 205p.

Many analysts believed investors had overreacted to the statement but were angered by the way the alert had been handled.

Just two paragraphs of the company's announcement were devoted to current trading conditions but contained enough worrying news to force analysts to cut about £1m off current year profit forecasts to about £15m. Next year's forecasts were slashed by £5m-£6m to about £22m. The company also said it would report an underlying profit of £8.1m on sales of £58m for the six months ended 30 June.

The bulk of Guardian iT's announcement, however, centred on the appointment of Neal Roberts as finance director. Mr Roberts, who joins the business in December from privately-owned Specialist Computer Holdings, replaces the highly-regarded Peter Jakob who is leaving to get involved in "early stage ventures".

Peter MacLean, the chief executive, said: "We're not alone in this [warning]; the market has been very poor for the last few months and other companies have experienced similar problems to ourselves."

By contrast, the downgrades at Kewill were more severe after the company warned it expected to record a "material" operating loss for the six months to 30 September. Its shares finished down 32 per cent at 54.25p.

Analysts now expect the company to produce a loss of about £4m for the year against previous expectations of profits of about £6m.

Guy Feld, head of research at Teather & Greenwood, said Kewill was suffering from the same affliction that other software businesses were seeing. "Customers are saying it's very interesting but can we put it on the backburner. Same old story – they've got no visibility," he said.

Kewill said it had seen "particularly difficult" trading conditions in the first four months of its financial year "with sales levels substantially below expectations" in both its e-commerce and enterprise resource planning divisions. The 90 job cuts it has made, in response to that downturn, have fallen mainly in the US although 20 positions have been axed in the UK.