London, UK-based LogicaCMG said that although it remains on target in its core IT services business with strong growth in the UK government and telecoms sectors, sales at its Wireless Networks division are expected to fall 10% in the first half of 2004 compared to the year-ago period.
A higher proportion of the orders we are winning have longer delivery schedules and a more substantial solutions and hardware component which extends revenue recognition, the company said in a statement. It also said that the higher hardware element in its recent orders would cause the company to incur a loss in the half-year period.
This is a big setback for LogicaCMG, which restored the Wireless Networks division to both profitability and revenue growth in the second half of 2003. The unit accounted for only 16.3% of the company’s total 2003 revenue of 1.7bn pounds ($3bn), but is seen as being the company’s biggest potential growth engine.
The company insisted that Wireless Networks will return a profit in full-year 2004 and that it continues to make progress in trialing and selling its multimedia messaging and mobile payments systems with major telecoms operators.
However, competition in these areas is tough with telecoms equipment manufacturers Ericsson and Nokia applying pricing pressure, and if it continues to struggle, LogicaCMG might begin to view the Wireless Networks unit as an unwelcome distraction, particularly with the strong growth it is enjoying in its outsourcing business.
LogicaCMG will report results for the first half of the year on September 1.
