The region’s largest indigenous vendor, Espoo, Finland-based TietoEnator Corp, saw its share price fall over 12% on the back of a sharp drop in net profit, while shares in Swedish rival WM-data AB rose 9% on strong second-quarter sales performance.
In the three months to the end of March, TietoEnator recorded net profit of 17.5m euros ($22.2m), down from 44.2m euros ($56m) in the same period the previous year, on sales that grew 3.6% to 443.1m ($561.7m). At an organic level, the company’s revenue fell 1%, largely due to the continuing poor performance of its core telecoms and media division.
TietoEnator said that the negative rate of organic growth in the quarter was due to the impact of the Easter holidays and a fall in performance-based rewards from partnership contracts signed by the telecoms and media business unit to 500,000 euros ($635,000) from 6m euros ($7.6m) a year ago.
The company said the drop in profitability in the quarter was the result of a number of factors including restructuring charges of 4.6m euros ($5.8m). TietoEnator added that its underlying decline in profitability was due to sub-optimal utilization, temporary increases in investments, and lower license sales in certain areas of the business.
TietoEnator’s shares fell to a 52-week low of SEK 171 in trading on the Stockholm exchange. Since the beginning of the year, the company’s value has slumped by about 41%.
Stockholm-based WM-data fared much better in its second quarter. In the three months to June, the company recorded net profit of SEK 128m ($17.5m), down slightly from SEK 133m ($18.2m) in the same period the previous year, on revenue that increased by 22.3% to SEK 2.7bn ($368.1m).
WM-data’s sales were once again boosted by its acquisition of the Nordic operations of Atos Origin in May 2005. The purchase has had a major impact on WM-data’s domestic sales, which grew 35.6% to SEK 1.5bn ($206.3m) despite organic growth of just 3%.
In vertical terms, WM-data continued to see strong demand in the public services and healthcare market. Revenue from the sector was up 27.5% at SEK 1.6bn ($219.4m). The company noted, The entire public sector is in great need of increased efficiency and more digital services, which contributes to positive growth.
WM-data said that the first half of 2006 had developed in line with expectations and most aspects indicate continued favorable demand and a stable market. The company added that competition in the Nordic region would increase, with offshore delivery playing a major role, and that this would have a dampening effect on growth.
