Emerging Markets Save Day for Didata and Datatec

Mergers, Acquisitions and Financial Results

A couple of years ago, Dimension Data and Datatec would have liked their US operations to be larger. It was, after all, the centre of the IT universe.

Now they are thankful that the US does not dominate their operations as its economy slumps and emerging markets roar ahead. Both companies issued results yesterday showing how well they are doing in emerging countries still hungry for IT.

Investec analysts say Didata is benefiting from being underweight in the US and skewed towards thriving emerging markets. It grew its US revenue 25% in the past six months, yet that was outstripped by its growth in Asia, while Africa provided "terrific" growth, says CEO Brett Dawson.

Frost & Sullivan analyst Spiwe Chireka says IT spending in Africa will not be badly hit by the global economic slowdown, as Africa is in a catch-up phase for networking and telecoms services. So the growing presence of Datatec and Didata in Africa should ensure their continued growth.

Chireka also applauds Datatec's Latin America expansion, which offers exciting potential to protect its income.

Datatec CEO Jens Montanana says the US economy "is muddling along" and now provides 42% of its revenue. A year ago it accounted for 51% of its revenue, and 57% the year before. It now earns 12% of its revenue in emerging markets thanks to acquisitions and organic growth, and should double that within two years.

"We are not trying to engineer our business to reduce it in the US, but to increase it elsewhere," Montanana says.

Gartner analysts say IT spending will represent 8,5% of the gross domestic product in emerging markets by 2011, compared with 4,3% in mature markets. "Vendors must consider emerging markets as a source of future opportunity," Gartner says. Datatec and Didata have been doing that already, and both are clearly benefiting from their foresight.

Business Day