Australian IT services providers have escaped entanglement in the US financial meltdown and report business conditions are remaining steady.
“It’s a bit ironic; in our pipeline we have $300 million of bids out there in the market now,” ASG CEO, Geoff Lewis, said.
“I’m not talking about opportunities we are working on but bids that we have put proposals in for. In three or four months we will see a lot of those closing and decisions made so we are very confident we are in a good position.”
In recent weeks the US investment banks have gone the way of the dinosaurs, triggering a meltdown on Wall Street. The Bush administration stepped in to save insurer, AIG, and pivotal mortgage lenders, Fannie Mae and Freddie Mac, while also pushing an unprecedented $US700 billion bail out package for the financial industry.
The extremely volatile situation sparked fears Australian companies would be caught up in the turmoil. However, ABN Amro Morgans senior analyst IT&T, Nick Harris, pointed out the domestic IT sector had outperformed the market this year and most listed companies are not heavily geared, limiting their exposure to the problems with the US banking system.
“Probably the biggest impact it has had on them is the cost of debt going up as opposed to having the debt pulled out from under them,” he said. “They certainly have strong cash fl ow and double digit interest cover so we are not particularly worried.
“It’s all about sentiment really. All indications if this bail out comes through are that the liquidity will come back into the US market, and the Australian market typically follows that. Views that the market has stabilised should actually help and it should move some of the Australian financial stocks, because we do trail the US quite significantly. In return, given their index weighting, that creates a bit more confidence in the rest of the market as well.”
ComputerCorp eastern regional manager, Tony Heywood, was also positive about the state of domestic business activity.
“We are going very strong in the services business, particularly in managed services and I think in a down market people are less likely to spend money on their own headcount and are outsourcing,” he said. “In terms of large projects the thing that seems to be delaying stuff, and yes some is being delayed, is more uncertainty around the government’s spending direction.