Gresham Computing Plc, the Southampton, UK company which has been desperately trying to reinvent itself as an e-business organization, has been tripped up by the legacy of its operations supplying more mundane software and services for mainframes in the financial sector. Its share price yesterday crashed 63.5% to 36.5 pence after Gresham warned it will incur a significant loss in the third quarter and results for the full year will be significantly short of current market expectations.
Gresham’s e-business operations and software testing applications are performing satisfactorily. But Y2K has cast a dark shadow over the financial services operations that accounted for nearly half of its revenue last year. Directors report extreme pricing pressures facing this division, which accounts for nearly half of revenue. It has suffered reduced contract rates, fewer than expected wins, cancellation of contracts, while some software licenses are being delayed until after the start of 2,000. And just to round off a bleak picture, Gresham reports slower than expected sales from its new storage management business in the US.
Gresham warns that the company’s markets are likely to remain highly uncertain in the near future and adverse conditions are likely to continue into the first quarter of 2000. Directors argue that progress will continue in the e-business and testing areas while the financial services business is well placed to take advantage of the widely predicted upturn in 2000.
This is a big set-back for the management team at Gresham which took over a company with little sense of direction in 1997 and embarked on a burst of acquisitions designed to give the company a broader product and geographical base. The high point of the new approach came in April this year when Gresham was put into the internet sub-category on the London stock exchange, a move that should have given the shares a higher rating. Yet revenue in the e-business area still only accounts for around a quarter of the total and to describe Gresham as an internet stock is, at best, misleading.
