Text messaging is on the wane, warns Logica

The 'stellar growth rate' which Logica's mobile networking business has enjoyed in recent times is over

Logica has warned investors that the boom in text messaging is slowing down.

In a generally upbeat trading statement, the UK IT services company said that it expected to continue to achieve strong revenue growth and "continued margin improvement" this year. However, it admitted that the slowdown in the mobile market would have an impact on the company.

"Our mobile networks business remains powerfully positioned globally and is by far the fastest growing business organically... however we are not seeing the stellar growth rates of the recent past," said Andrew Given, Logica's finance director. Given predicted that Logica's mobile networking business would continue to grow year-on-year.

Logica, a major supplier of text messaging software to the mobile industry, has benefited strongly from the explosion in SMS messaging. Texting has been a great, and largely unexpected success, with an estimated 50 billion text messages sent worldwide in the first three months of 2001. This boom boosted Logica's profits last year.

But, with the big mobile phone companies slashing jobs, closing factories and warning of lower than expected sales, analysts have worried that Logica could be hit by a slump in the mobile sector. There are also concerns that with consumer GPRS services rolling out, and 3G on the way, fans of text messaging could switch to flashier technology. Network operators claim that mobile users will soon be sending pictures and even video clips to each other.

In the trading statement, issued ahead of its end-of-year results on 30 June, Given emphasised that the group would be matching market expectations and was confident about the future.

"With the other businesses expected to accelerate in the first half of next financial year, our overall portfolio of businesses will continue to deliver superior performance," he insisted. The company is expected to declare pre-tax profits of around £153m on 30 June.

Logica warned earlier this week that it could quit the UK, if it was forced to include employee share options in its profit and loss accounts.

For complete business coverage, see ZDNet UK's Enterprise Channel.

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