End of the line for LogicaCMG telecoms

UK IT services firm LogicaCMG has pulled out of the telecoms market, an area where it once enjoyed huge profits thanks to the popularity of text messaging.

On Tuesday, LogicaCMG announced that it had sold its Telecoms Products business to a consortium of investment firms for £265m. This division manufactures networking equipment, including servers that handle SMS, MMS (multimedia messages) and voicemail.

The private equity firms that have bought the division are planning to rebrand it as a new company, dubbed Acision.

The move will solidify LogicaCMG's position as an IT services player. It also marks the end of an era. LogicaCMG enjoyed massive success as the SMS market took off in the 1990s, as its software was used by many mobile network operators to handle their messaging systems. The company enjoyed eight consecutive years of at least 40 percent profits growth between 1993 and 2001, driven in part by its telecoms sector — which in 2000 made up 40 percent of its business.

However, this situation didn't last, and competition from other suppliers meant that LogicaCMG's Telecoms Product business lost market share and revenue.

"The SMS centre market has now become a commodity, with very high-processing store-and-forward machines that cope with billions of messages per day," explained Jean-Charles Doineau, research director at Ovum. "Transition to IP-based messaging has not proved easy to manage in developed countries, and in developing countries competition, such as China's Huawei and Israel's Comverse, has made market conditions tougher," Doineau added.