Logica the dejected bridesmaid
Only 42 days ago the broadsheet headlines were that Logica’s poor performance would lead to yet another takeover bid, well actually speculation about a speculative bid. Under our own headline of “Always the Bridesmaid never the Acquisition” we said that it would not happen. It has not. We refuted Logica’s statements of slowdown’s in the Nordics and Benelux and laid blame at the door of under-investment; failure of Logica’s management to change with the markets; and highlighted the benefit Logica had for expansion due to smaller contracts in the market which tier one suppliers are not geared up to fight effectively.
This week, Logica announced the loss of at least 1,300 jobs, paring back on property assets, and taking write-downs on three major contracts of £39m – total £130m. It also dropped its growth estimates from 5% to 3% for 2011 as well as its expectations on achievable margins. The Financial Times headline of “Beginning or end of bad news?” is certainly the right one. What can we expect?
Well, the market’s reaction suggests some doubt – the share price dropped 16%. This means Logica is half the price it was last year. This is worrying. Let’s not start acquisition stories again, however if Logica falters again or some major project issue comes up then a predator would get a bargain.
Andy Green captured market sentiment when discussing his client experiences said “they have never been so unsure of the future”. In our opinion Logica needs a marketing and sales management jolt to leverage an excellent brand and solid client relationships. Will executive and management be given the time before investors demand real change?