Logica cuts growth outlook

February 20, 2002 Posted: 1129 GMT

LONDON (CNN) -- UK software group Logica's shares tumbled on Wednesday after it slashed growth forecasts for its mobile network unit for the second time in two months.

The London-based company, which is the world leader in text messaging software, said growth in the unit would be "at best modest" in the second half of its fiscal year.

Logica (LOG) said the weak sales outlook was due to an expected drop in revenue in Japan.

The warning came as Logica delivered better-than-expect first-half profit.

Pretax profit rose to £78.5 million ($111.9 million) for the six months ended December 2001, from £64.8 million a year ago. A Reuters survey of analysts put the consensus forecast at £75.7 million.

Total revenue was up 19 percent to 600.2 million, with sales in its mobile networks unit rose 28 percent to £161.7 million.

Logica's shares fell almost 15 percent to about 419 pence in midday trading on Wednesday in London.

The company's shares have fallen nearly 40 percent since December, when Logic first lowered its growth forecast for the mobile network unit, which accounts for almost a third of total sales.

The Japanese market, Logica's biggest source of revenue, has been hurt by weakening sales as the country's economy slipped into recession.

"Having delivered strong growth in messaging during the first half, we expect growth in Mobile Networks in the second half, compared to last year, to be at best modest," the company said.

"This is largely due to the earlier and greater than previously anticipated impact of network-wide capital spending constraints in the Japanese market, which will result in a revenue decline in Japan compared to last year. However we see continued strong growth in the large emerging messaging markets, such as the Americas and Eastern Europe."

Despite Logica's market dominance, it has yet to make any inroads in multi-media messaging software (MMS). Analysts have questioned the future growth in text messaging after a number of its rivals announced deals this year.

MMS allows users to send pictures, video and audio clips on mobile phones.

Meanwhile, Logica announced on Wednesday that Seamus Keating has been named finance director, replacing Andrew Given who would become deputy chief executive.

-- Reuters contributed to this report