LogicaCMG this week disposed its Telecoms Products division [Mobile Today]. It comprises more-or-less the business of the former Irish company, Aldiscon, which was acquired by Logica in 1997. Aldiscon was (and its products remain) the runaway market leader in the global market for mobile network SMS software.
I worked in Logica’s telecoms division (the core consulting one) at the time of the Aldiscon acquisition. I remember there was some genuine excitement at the time. Logica had recently broken into the FTSE 100, and many of my colleagues accepted management’s assertions that Aldiscon would enable Logica to sell a package of product, integration and consultancy to customers who were mobile operators. I’m sure there was some logic in this argument but I never really bought it. In my view a product portfolio compromised the firm’s impartiality as a independent systems integrator and consultancy. Even if impartiality is retained organisational focus is much harder to retain. This appears to have been borne about by the quote from the CEO (who was also CEO at the time of purchase):
LogicaCMG CEO Martin Read said: ‘… We have now secured an attractive sale price for the strengthened business. This divestment allows LogicaCMG to focus on its core strengths in IT and business services, using its industry and domain expertise and its strong business and technology insight to enable its customers to become more productive.’
Such a divestment would be considered ‘good practice’ for an organically grown non-core business. For an acquired non-core business it’s better to see it as a corrective U-turn.
In my view the company has lost some of its edge in recent years (although growth has continued by virtue of the buoyant IT market). I’m glad to see they’ve decided to sell the products business.
Arguably Logica still made a healthy profit on the Aldiscon sale: £265m against a purchase price of £51m. Nevertheless keener strategists ought to consider the opportunity cost of what Logica would have done with that money given the massive expansion that has happened since in it’s core IT services market.
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