The closing months of 1998 witnessed a feeding frenzy of acquisitions in Norway ahead of changes to accounting requirements related to the treatment of goodwill. The new rules came into effect on the January 1, 1999. However Oslo, Norway based services company Merkantildata ASA just carried on feeding. Acquisitions are core to our strategy for growth, reported Steinar Sonsteby, Vice President of Merkantildata’s System Integration division. Merkantildata has bought over 65 companies since 1991 the bulk of these acquisitions came in the last two years. We will of course be affected by the new rules. Some companies will seem overvalued but we do not intend changing our strategy, Sonsteby said.
True to these words Merkantildata has acquired four companies so far this year at a cost of more than $42 million. In April 1999 the company bought TelCall AS, an Oslo based IP networks and security specialist company for NKr 9.5 million ($1.2 million) and the logistics software developer and consultancy firm EDB System Service AS (ESS), again from Oslo for NKr9 million ($1.1 million). February also saw the purchase of Finnish IT products and services company Nexor SuperStore Group for around $36 million. Nexor is a diverse company offering products and services in logistics, e-commerce, NT, Unix and IBM systems. These acquisitions followed the February 1999 purchase of Stockholm, Sweden based Saven Data AB for SKr 32.1million ($3.74 million). Saven Data offers services around internet/intranet, groupware, e-mail and database systems.
Lurking in the background is the specter of a slump in oil prices for the oil dependent Norwegian economy. Here again though Merkantildata is upbeat. Less than 5% of our revenue is directly related to the oil industry and so we expect that, at most, a point [1%] will be lost. Of course if the Norwegian economy goes into recession we will be effected like every other business here, said Sonsteby. Merkantildata has covered itself to some extent, as its revenue is not wholly dependent upon its home market. Sonsteby reports that 1999 will be the first year in which both its Swedish and Danish revenue will exceed its Norwegian turnover.
Indeed Merkantildata turned in a healthy set of first quarter 1999 figures. These showed consolidated revenue for the three months to March 31, 1999 of NKr 2,394.8m ($306.9m), an increase of NKr 340.3m ($43.21m) or 16.6% on figures for the first quarter 1998. The group returned operating margin of 5.5% for the quarter.
To maintain this performance Merkantildata has identified Internet/intranet technology and e-commerce as one of the main focus areas for the company in the coming years. With a number of remote server farms already in operation through its Mainframe 2000 service offering, Merkantildata also expects to benefit from the trend in server and storage consolidation. Sonsteby adds that the merging of telephony and IT is a major opportunity that it is well placed to take advantage of.
The systems integration division is Merkantildata’s largest unit accounting for 68.1% of total revenue. In the first quarter 1999 the division returned revenue up 11.4% at NKr 1,722.6m ($218.69m) against revenue for the same quarter in 1998. The division builds IT infrastructure and develops ‘operating solutions’ with integrated data, multimedia and telecom systems. It also offers consultancy services, project management, operation, monitoring and training services. The division currently has around 2,200 employees. 800 of these are based in Norway, 960 in Denmark and 446 in Sweden.
The company’s communication division returned revenue for the quarter up 29.2% at NKr 235.6m ($29.91m) and now accounts for 9.3% of consolidated turnover. Its fix is services and products in PABX and IP telephony arenas. Headcount for the division stood at 297 as of December 31, 1998. Some 164 of these are based in Sweden, 106 in Norway and 27 in Denmark.
The application division develops software for business critical information systems for finance, purchasing, inventory, logistics and product management functions. The unit has been strengthened substantially through a number of key acquisitions over the past 18 months and now has significant expertise in Oracle and Microsoft databases and tools. For the quarter the division returned revenue up 30.7% to NKr 103.5m ($13.14m). There are currently 434 employees within the division with 310 based in Norway and 124 in Sweden.
PC LAN is Merkantildata’s distribution division that handles the sale of PCs, servers, network and communication products and data-storage systems. For the quarter the division returned revenue up 57.4% at NKr 467.8m ($59.39m).
