Data#3 defends more bad results

Data#3 defends more bad results

Looking like it will fail to meet profit expectations for the second consecutive quarter, one of Australia's few listed integrators, Data#3, has undergone six months of soul searching in an attempt to refocus and rebrand itself around services.

The $130 million company has confirmed its May prediction that the "GST-freeze" in spending would significantly effect its fourth quarter performance, which in seasonal terms has been the strongest in previous years, has come true.

Citing the GST and Y2K, Data#3 is expecting to post revenues for its fiscal year, ending June 30, in the region of $125 million, 5 per cent lower than the previous year.

Diminished product sales of around 35 per cent have been the prime factor dragging down Q4 revenues, while the integrator's services business has increased in the vicinity of 18 per cent, according to Data#3 CEO John Grant.

After six months of research conducted on 200 of Data#3's customers, the company has announced it will be positioning itself around four lines of business in order to grow the company's services offerings to around 70 per cent of its revenues over the next few years.

Citing the Internet and e-commerce, changing IT priorities, complex technology and staff shortages as the major causes of change in the SME landscape, Data#3 is hoping to leave new footprints in the channel as it restructures its focus around the SME services market.

Although Grant assured ARN the company would be continuing to focus on its 450-plus serviced accounts, which make up around 80 per cent of the integrator's business, it realises that in order to grow it must reach new customers with services in the SME space of sub-1000 employees.

The revamped business lines include enterprise consulting, integration services, outsourcing and of course procurement.

"It's all about delivering expertise. ‘We've got business issues' is what they're saying out there . . . We've got terrific expertise in our business, which is being submerged under this broad-based framework and the connotation of being a ‘quote unquote' reseller/integrator," Grant said.

The move reflects Data#3's internal resources, which sees 70 per cent of its 460 staff geared around technology services rather than moving boxes, Grant added.

"Therefore we've got capabilities which are, quite frankly, not well understood. Too often we get labelled with the integrator/reseller tag. So clearly the strategy going forward is to move the perception. And part of the process of taking our business forward and the way we're structuring it is to do exactly that," he added.

Trimming the fat

In conjunction with the extensive rebranding strategy to migrate Data#3's image to one of a consultancy firm, from September 1 all executive directors will resign as directors to concentrate on their executive responsibilities, effectively ploughing them back into the integrator's business. Currently, the board consists of a non-executive chairman, three non-executive directors and five executive directors.

The new-look board will be reduced from nine directors to four, comprising of John Grant, new chairman Richard Anderson, Graham Clark, Craig Bishop and retired chairman Howard Stack.

"Effectively we've had a board which is structured significantly towards the executive directors and we made a decision around 18 months ago that we needed to migrate that over time to be more representative in the non-executive sense.

This was in terms of both having outside expertise to bring onto the board and representing the company geographically," said Grant. "In fairness, it has been related to the performance of the business."Expecting an industry increase in IT expenditure and the fruits of its restructuring, Grant believes Data#3's declining fortunes will reverse towards the second half of this financial year.

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