Logica chief defends strategy as shares sink to three-year low

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The Independent Online

The IT services company Logica hit back at the investment community yesterday, saying it remained "confident" on the prospects for its key text messaging division as its shares sank a further 2 per cent in the wake of another negative broker note.

Andrew Given, Logica's deputy chief executive, said: "This is a game that is at its beginning and so there's everything left to play for. They [analysts] may not have thought through the dynamics of the market place and they do tend to take a somewhat short-term focus."

Logica's shares plunged again as speculation continued that its key telecoms software division was failing.

The fall comes amid wider concerns that the telecoms sector is showing few signs of life, particularly in the wake of recent negative comments from Nokia and Ericsson, as the industry moves from the current generation of mobile phone networks to the next generation, known as 3G.

The mobile phone operator Vodafone also came back under pressure again yesterday, closing down 4.25 per cent, or 4.75p, at 107p after its US joint venture Verizon Wireless reported slower-than-expected first quarter subscriber growth. Vodafone was the biggest faller in the FTSE 100 index.

Logica, meanwhile, lost 7.5p to close at 355p, leaving the shares at their lowest point for around three years.

Analysts at Credit Suisse First Boston placed a target price on the stock of 330p based around fears that Logica's text messaging business could come unstuck thanks to its high exposure to Japan.

Michael Tyndall, an analyst at Nomura, was also negative. " Given the growth prospects short term, it's not a very positive outlook," he said.

Logica has, since the start of the year, been dogged by accusations that the division was stalling and that it was losing out on lucrative next generation MMS contracts to rivals, particularly CMG.

MMS, or multimedia messaging service, is an extension of the current text messaging systems on mobile phones. It will enable customers to send and receive messages that include text, pictures and video.

Mr Given admitted that the division was in a "transition" period, saying: "It's a period of maximum uncertainty for investors and clearly there's uncertainty for us." But he added: "We are confident because we believe the positioning and the strategy is right for the market. It has not yet produced the answers that we would have liked it to produce but, nonetheless, we still believe that we have good grounds for believing that the strategy and positioning will produce the right answers over the next while."

Earlier this month, CMG won its fourth MMS contract thanks to Portugal Telecom's mobile phone business, Telecomunicacoes Moveis Nacionais. It has deals with Telia, Telenor and Hutchison and is expected to land a contract with Vodafone.

Logica has signed two MMS contracts so far with unnamed operators, although it is trialling its technology with about 20.

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