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Jim Armitage: We need more blue sky thinking to support British tech after Inmarsat deal

JIM ARMITAGE

The eyesore of Old Street roundabout is the last place you’d expect to find mission control for a fleet of space craft. But look up and you’ll see a building stacked with satellite dishes which is just that.

From Inmarsat’s London offices, it launches and guides a fleet of high-altitude satellites used to provide mobile comms in remote places, from deserts to ships and aircraft.

Each craft takes 100 engineers five years to build at a cost of millions of pounds that only gets recouped years into the future from subscribers. And there’s the rub. By the time you’ve launched your satellite, the market may have changed completely. That can go in Inmarsat’s favour, as in the discovery that airlines would want to use its $1.6 billion GlobalExpress satellites for wifi on planes. Or it could go against it, as with the rapid growth in rival technologies such as Sir Richard Branson’s OneWeb satellites.

Sadly, the London Stock Exchange is not a forgiving place for such big-spending tech companies. Instead of looking at future growth potential, investors focus on revenues and spending today. Inmarsat’s predicted cashflow this year is £418 million; its capital expenditure: £433 million. Investors run for the hills.

Away from the UK stock market there are those prepared to put their money to work longer term. Today’s takeover is fronted by private equity firms Apax and Warburg Pincus who have five-year investment horizons, backed by two Canadian pension plans who invest in terms of decades.

Last year it was a US-listed go-getter, Echostar, with long-sighted tech investment backers — which sniffed around for a possible bid.

With a lack of interest from UK plc investors, you can’t blame Inmarsat for listening to such offers, and eventually capitulating. Under its new ownership, Inmarsat will build itself away from the pressures of quarterly reports and demands for big dividends.

The headquarters will remain in London, and it is hoped that the company will thrive and grow.

But what a pity our public markets couldn’t support it.

Here’s hoping HP truth will out

Seven years ago, photocopier and printer giant Hewlett-Packard paid $11 billion to buy one of the jewels in Britain’s technology crown, Autonomy.

It did this, not because it was conned by the company’s founder, Mike Lynch, but because HP desperately wanted to diversify into software and services, and Autonomy’s big data search capabilities promised to be popular with HP’s hardware clients.

It overpaid, but only because it figured on $17 billion of synergies once its 300,000 staff began selling Autonomy’s services.

After the deal was struck, new management took over at HP. First, they failed to understand the deal’s reasoning, then they botched the integration.

That is what resulted in billions of dollars of value destruction. Bad management, not fraud.

This case should never have got to court. But hopefully now the truth will out.