Dimension Data Holdings PLC

views updated

Dimension Data Holdings PLC

PO Box 56055
Pinegowrie 2123
South Africa
Telephone: +27 11 575 0000
Fax: +27 11 576 3631
Web site: http://www.didata.com

Public Company
Incorporated: 1987
Employees: 8,524
Sales: $2.36 billion (2004)
Stock Exchanges: London
Ticker Symbol: DDT
NAIC: 541513 Computer Facilities Management Services; 518111 Internet Service Providers; 518210 Data Processing, Hosting, and Related Services; 541512 Computer Systems Design Services

Dimension Data Holdings PLC is South Africa's leading information technology services and solutions provider. The company is also one of the world's leading IT groups, with operations in more than 30 countries. Dimension Data operates in two core IT sectors: Networking Services, including high-speed Internet and Intranet installation, maintenance, and management, project engineering and management, and technical assistance; and Interactive Services, including e-commerce site development, hosting, and management, along with Customer Relationship Management services. Dimension Data's key markets include the United Kingdom, with 10 percent of revenues; the United States, accounting for 17 percent; Africa, at 18 percent; Asia/Pacific at 16 percent; and Europe at 29 percent. As it has approached the mid-2000s, Dimension Data has been actively reinventing itself, extending beyond its former capacity as a reseller and integrator of third-party technologies to become a "total solutions provider" with its own in-house and proprietary software and technologies. The shift toward higher-margin operations comes in part as a response to the company's losses during the high-tech slump of the early 2000s. Dimension Data maintains its headquarters in Pinegowie, South Africa, and is led by founder Jeremy Ord.

Early 1980s Origins

Dimension Data was founded by Jeremy Ord in 1983 in order to provide information technology services to the South African market. Ord then merged his company with another company operated by two former Wit University schoolmates and fellow rugby fraternity members Richard Came and Bruce Watson. The company was then listed on the Johannesburg Securities Exchange in 1987, with Ord as company chairman. Dimension Data's expansion remained limited to South Africa into the early 1990s due to the embargo against South African apartheid laws.

The end of apartheid signaled new opportunity for Dimension Data. Into the mid-1990s, the company began to reposition itself, particularly by expanding beyond its former base as a systems integrator. By 1994, the company had launched a new Software and Services division. In that year, also, Dimension Data's importance in the South African market was highlighted by its being named one of Cisco's six internationally based Gold Partners. Next, the company added Internet and e-commerce capabilities, through the 1996 acquisition of 25 percent of Internet Solutions in South Africa. That purchase gave Dimension Data access to South Africa's leading internet service provider, as well as its experience developing infrastructures and services for the e-commerce sector.

By then, however, Dimension Data had begun preparing its drive into the international IT market. The company's first foreign move came in 1996 as well, when it bought a 45 percent stake in Com Tech Communications Ltd., based in Australia. The company subsequently increased its shareholding position in that company to 66 percent in 1997.

In the meantime, the company continued developing its software technologies, finding success on the international market for that division as well. In 1997, for example, the company reached a licensing agreement with the Deloitte & Touche Consulting Group for use of Dimension Data's proprietary software designed to help companies manage the so-called "millennium bug" ahead of the year 2000.

The year 1997 also marked a year of significant growth for the company. After buying up full control of Internet Solutions, the company returned to the global market, purchasing Australia's Datacraft Limited. That purchase helped transform Dimension Data into a major player in the Asian Pacific region's IT market, giving it some 25 percent of Australia's networking market. The acquisition of Datacraft also gave the company control of a 51 percent stake in Singapore-based Datacraft Asia, and a 20 percent share in the Asian region's networking market.

The company's attentions also turned to the United Kingdom. In 1997, the company acquired 75 percent of The Merchant Group. That company, founded in the early 1970s, had developed into one of the United Kingdom's leading IT outsourcing groups, with a specialty in the operations of customer contact call centers.

Global IT Leader in the 2000s

By the end of the decade, Dimension Data had clearly established its strategy of becoming one of the world's first truly global IT services and support companies. In 1999, Dimension Data moved to solidify its presence in Europe, acquiring GK Communications Ltd. That acquisition permitted the company to take a leading share of the United Kingdom's voice and data integration market. The company returned to England that year, buying up nearly 50 percent of Chernikeef Networks Ltd., which permitted Dimension Data to extend its own network integration operations.

Still more significant was the company's acquisition of the European operations of fellow South African Comparex Holdings. For a price of ZAR 8.1 billion, Dimension Data leapt to the top of the world's leading independent IT services companies. Next, Dimension Data went shopping for a stake in the United States. As Jeremy Ord explained to Business Times: "Didata wants to offer its customers service 24 hours a day, seven days a week, 365 days a year. That is why the U.S. has become an important point for us. Once we do, we will be the only global network service in the world. Our target market then becomes global players, multinationals. The sky is the limit in terms of market opportunities."

Dimension Data looked first to extend its network integration business as its entry to the United States. In 1999, the company located its first acquisition target, New Jersey-based RE/COM. Dimension Data paid $40 million to acquire 70 percent of that company.

To fuel its global ambitions, Dimension Data decided to switch its primary listing to the London Stock Exchange in 2000. The move permitted the company to raise its profile among international investors and generate a war chest for the next phase of its ambitious expansion drive.

By the end of 2000, Dimension Data had spent more than $1.2 billion in acquisitions, including the £200 ($350) million acquisition of the remaining shares of Chernikeef (renamed as DDUK), and the purchase of full control of Com Tech for $146 million. At the same time, the company stepped up its drive into the U.S. market, where it acquired Integrated Systems Group, based in New York, and Data Comm Systems Inc., expanding its network integration operations in the United States. Moving beyond New York, the company acquired TimeBridge Technologies, paying $135 million for the Maryland-based provider of network and e-business services. Dimension Data also boosted its presence in continental Europe, through the acquisition of Swiss network integration group Netpartner AG.

The company's buying spree continued into 2001, with the additions of Brussels-based Planet CTI, which brought Dimension Data expertise in the computer telephony integration sector, and Time Netbuilding B.V., one of The Netherlands' top network integration services companies. At the same time, in the United States, the company picked up two North Carolina-based companies, Premier Systems Integrators and Matrix Networking Group, for a total of more than $150 million. The company also outbid computer giant Compaq for Proxicom, a highly sought after e-services group based in Reston, Virginia. The purchase cost Dimension Data nearly $450 million. Also that year, the company entered Korea, paying $25 million to buy Dasan Electronics through its Datacraft Asia subsidiary.

The company also announced plans to expand into the United States' Midwest and West Coast markets, in addition to plans to enter Italy, Spain, and elsewhere in Europe. But the crash of the global high-tech markets quickly caught the company short. The company was seen as particularly vulnerable due to its heavy exposure to struggling Cisco Systems. By the end of the year, and after posting a profit warning in the summer, the group was forced to call a halt to further acquisitions. Indeed, by the end of its fiscal year in November, the company revealed losses mounting to $1.6 billion.

Chairman Ord put the best face possible on the group's difficulties, telling the Times: "We wanted to grow in the US, Europe and the UK. That is completed and we now intend to integrate the businesses." Dimension Data launched a cost-cutting effort through 2002, including shedding some 19 percent of its payroll. Yet that was seen as too little, too late, as the group's sales slumped to $2.2 billion that year, with pretax losses of $2.6 billion (a figure that included a $1.8 billion write-off of goodwill from its acquisition spree).

Company Perspectives:

It all comes back to the network.… One constant in the ever changing world of technology is the strategic importance of the communications network. Discovering faster, easier and less costly ways of connecting people to each other and information is of paramount importance to worldwide businesses. Although the network is now mainstream, its strategic importance is increasing. As the pathway to sharing and distributing the benefits of technology, the network's role has expanded beyond simply facilitating communications. The spotlight is on the network to provide creative solutions that allow isolated technology investments to be exploited throughout the entire company. Dimension Data's 20 years of intellectual property and expertise in planning, building and supporting communication networks places us in a good light.

Losses continued to plague the company through 2003, and forced a management reorganization. Part of that reorganization involved the transformation of the company's chairman position—which previously had combined chairman and CEO roles—into a non-executive position. The company then moved former COO Brett Dawson into the new CEO spot, while Ord became the group's non-executive chairman. The company also continued its restructuring, selling off its cash-hungry, but profitable Proxicom subsidiary at the end of 2004.

The slow return to growth of the global IT market caught up with Dimension Data in 2004. By the end of its fiscal year, the company's sales had begun to grow again, topping $2.36 billion. The company also had significantly reduced its pretax losses, which dropped to just $4.4 million. In celebration, Dimension Data immediately returned to the acquisition trail, announcing its agreement to acquire Australia's SecureData, and its New Zealand SQL Services arm, in December 2004. Dimension Data prepared to resume its expansion as one of the world's global IT leaders into the new century.

Principal Subsidiaries

Comtech Holdings S.A. (Belgium); Conscripti (Pty.) Ltd.; Core People (Pty.) Ltd.; Datacraft Asia Limited (Singapore; 51.49%); Diginet AG (Switzerland); Dimension Data (Pty.) Ltd.; Dimension Data (US) Inc. (U.S.A.); Dimension Data Advanced Infrastructure Ltd. (U.K.); Dimension Data Algeria S.p.A.; Dimension Data Australia Pty. Ltd.; Dimension Data Belgium S.A.; Dimension Data Botswana (Pty.) Ltd.; Dimension Data Deutschland Holdings GmbH; Dimension Data España SL; Dimension Data France S.A.; Dimension Data Germany AG & Co.; Dimension Data Holdings Nederland B.V.; Dimension Data Italia S.R.L.; Dimension Data Luxembourg S.A.; Dimension Data Nederland B.V.; Dimension Data Network Services Ltd. (U.K.); Dimension Data North America Inc. (U.S.A.); Dimension Data Sverige AB; Dimension Data Switzerland S.A.; GK Communications Group Ltd. (U.K.); Internet Solutions (Pty.) Ltd.; Linx Holdings (Pty.) Ltd.; Merchants S.A. (Pty.) Ltd.; Planet CTI (Belgium).

Principal Competitors

New Africa Investments Ltd.; Electronic Data Systems Corporation; Computer Sciences Corporation; Sun Microsystems Inc.; Hewlett-Packard France; Singapore Technologies Private Ltd.; Oracle Corporation Ireland Ltd.; Fujitsu Services Holdings PLC; Sema S.A.; Convergys Corporation.

Key Dates:

1984:: Jeremy Ord founds a network integration company in South Africa, then merges it with a company owned by two former schoolmates.
1987:: Dimension Data goes public on the Johannesburg Securities Exchange.
1994:: The company adds software development and services operations.
1996:: Dimension Data acquires a stake in South Africa's Internet Solutions and makes its first international acquisition, of Australia's Com Tech Communications.
1997:: The company acquires Datacraft Ltd. in Australia, and its Datacraft Asia subsidiary in Singapore; majority control of The Merchant Group in the United Kingdom is acquired.
1999:: The company acquires GK Communications and Chernikeef Networks in the United Kingdom; Re/Com, its first U.S. acquisition; and the European holdings of Comparex.
2000:: The company switches its primary listing to the London Stock Exchange, and launches an ambitious acquisition drive.
2001:: Proxicom, an e-services provider in the United States, is acquired; the company posts losses of $1.6 billion for the year.
2004:: The company reorganizes its management structure; Dasan Electronics in Korea is acquired.