Staff Writers

Nortel Networks has moved to settle two class action shareholder suits which arose following the accounting scandal the company suffered in 2004.

The company was forced to re-state its earnings figures for the previous three and a half years and the subsequent plummet in the company’s share price angered shareholders who rightly felt they had not been kept informed.

Now the company wants to move on and although the settlement, believed to be the fifth largest of its kind ever, will severely impact the company’s financial position it will allow it to get on with business.

“Our intent is to achieve a fair resolution of these lawsuits and avoid a prolonged, uncertain and costly litigation process,” said Harry Pearce, chairman of the Board of Directors, Nortel. “A final settlement would remove a significant impediment to Nortel’s future success and allow Mike Zafirovski and the Nortel team to move forward.”

The proposed settlement is also conditioned on Nortel and the lead plaintiffs reaching agreement on corporate governance related matters and the resolution of insurance related issues.

Under the terms of the settlement Nortel would make a payment of US$575 million in cash, issue 628,667,750 of its common shares (representing 14.5% of its current equity), and contribute one-half of any recovery in the existing litigation by Nortel against the Company’s former executives who were fired over the scandal in early 2004.

The equity component of the settlement will result in a non-cash charge based on the fair value of the common shares issuable. Based on a closing price of US$3.02 as of February 7, 2006, this charge would be approximately US$1.898 billion and will impact Nortel’s financial statements over a period of time.

On an after-tax basis, and based on the February 7, 2006 share valuation, the Company expects to record a total charge of US$2.473 billion, or US$.57 per share. The Company expects it would fund its cash contribution to the settlement fund out of its then available cash balances.

The proposed settlement would contain no admission of wrongdoing by the Company or any of the other defendants and is still subject to final negotiations.

Acer has signed up a major hardware supply deal with QBE Insurance covering notebooks, desktops, servers, Tablets, LCD’s and handhelds.

The deal which covers all the insurer’s hardware requirements, right down to the Wyse terminals, came down to Acer’s ability to customise the offering and SLA for the company.

Steve Squires, Head of IT Operations for QBE’s APACE Division, recognised that Acer’s customer specific approach allowed him to have both his hardware and service needs tailored to suit his particular requirements. “Acer offered us customised processes and developed a specific SLA that I knew would deliver tangible business benefits to QBE and further assist us in reducing our total cost of ownership.

“Other vendors traditionally take an off-the-shelf approach to SLAs and expect the customer to make them fit, but Acer developed customised processes to meet and fully service our particular IT needs,” said Squires.

Frank Ugolini, Acer National Corporate Sales Manager said: “Acer’s customer specific approach was a perfect match for the depth and breadth of QBE’s IT requirements. Rather than focus solely on the hardware like other IT vendors or tell the customer how to engage with us, Acer first looks at the customer’s business needs and then develops customised SLA’s and processes across a wide range of devices and business operations.

“Working with a market leader like QBE, Acer was able to demonstrate its ability to implement a fully integrated product suite by simply customising the engagement process around QBE’s specific needs,” concluded Ugolini.

The commission checks will be flowing at Dimension Data this week as the integrator announces another $40 million contract, this time with Centrelink.

Just last week the company announced a $40 million contract to provide network management services for the South Australian Government, now the Federal Government is kicking in with another $40m.

The contract will see Dimension Data contract to provide “equipment, maintenance and related professional services” for a network overhaul dubbed the Data Network Redesign Project. The sales team involved may have to hang around to get their commission cheques though as the contract has a five year lifespan.

The overhaul will see DiData deploy a secure, IP converged network form core routing and switching to encryption and public key infrastructure (PKI).

“Dimension Data has had a long and productive association with Centrelink, initially working with the agency, then known as the Department of Social Security, on its first major network upgrade in 1993. A number of our current team members worked on the design of this original network – a factor which has maintained our reputation for technical excellence within Centrelink,” said Steve Nola, Australian CEO, Dimension Data.

“This is a significant win for Dimension Data in Australia – Centrelink is one of the largest IT users in this country – and recognition of our pre-eminence in both the networking and security arenas in this country.”

Centrelink’s IT environment supports 25,000 employees using 35,000 screens across more than 1,000 service delivery points, including 316 Customer Service Centres, seven Remote Area Service Centres, 360 Centrelink agents, 178 access points and 26 call centres – the largest single-purpose call centre network in Australia, receiving more than 32.6 million calls per year.

Shares in Google fell almost 20 per cent overnight as the search gorilla’s earnings results fell foul of analyst’s expectations.

It is the first time since the company’s IPO that it has missed the Wall Street earnings targets taking the lustre off a share that has more than quadrupled investors money. A massive rise of 82 per cent in net income and 86 per cent in sales was not enough to allay analyst’s fears that the stock is over-valued.

The resulting fall in valuation is in excess of US$15 billion from its market capitalisation of US$128 billion.

The company blamed a higher than expected tax bill resulting from higher costs of overseas operations on the short fall. At the tax rate initially forecast by Google, adjusted earnings would have been US$1.81 per share, versus the consensus of US$1.77.

Revenue, excluding traffic acquisition costs of US$629 million, was US$1.29 billion, nearly double the US$642 million in revenue net of such costs it reported in the year-earlier fourth quarter. But the stock is priced “for perfection” offered one analysts and anything short of perfection was duly punished.

In an analyst conference call, Google CEO Eric Schmidt said the company plans significant investment this year, most of that on infrastructure (and real estate). “We are going to invest for the long term and make some really big bets,” he said without offering more detail.

The company made a one-off US$90 million donation to the Google Foundation and the results included a US$58 million charge in stock compensation.

Net income for the fourth quarter rose to US$372.2 million, or US$1.22 per diluted share, from the year earlier quarter’s US$204.1 million, or US$0.71 cents a share.

Hosting and managed service provider WebCentral announced its half yearly results today and its managed services and SaaS offerings are producing stella results.

The company’s rich media content management business, FTR (For The Record), which supplies court recording type services largely to the US market, didn’t look as healthy as it did the prior half which was buoyed by a $7 million contract from the US Social Security Administration. However, the FTR has some contracts in place, which are not yet reportable says the company and which the Group says will assure futer results.

Overall the Group’s revenue increased 4 per cent to $29.8m and net profit after tax of $1.3m for the half year to 31 December 2005. This compares with revenue of $28.7m in the previous corresponding period and net profit of $1.7m.

In particular, the Group’s web and application hosting business achieved good growth for the half

reporting an 11 per cent increase in revenue to $22.9m and a 15 per cent increase in earnings before interest and tax (EBIT) to $2.5m from $2.2m in the previous corresponding period.

Taking a closer look at the figures, the managed hosting business achieved a 31 per cent increase with the company signing “a number of new, long term managed services contracts with corporate clients including a major sporting body, a mobile phone selection service, a global videoconferencing company and a national art union”.

The real winner for the future could be Software as a Service (SaaS) which reported a telling 72 per cent increase in revenues growing from $1.1m in the previous corresponding period to $1.9m by the end of last year.

The company says the ASP model has “experienced a dynamic resurgence in the past 18 months, boosted by the growing range of quality business applications available via the internet as well as improved access to affordable broadband.

The ASP division accounts for more than 20 per cent of the company’s data usage and it reports that actual customer numbers have grown significantly in the past six months.

The Managed Exchange premium email offering grew by 112 per cent in the past 12 months and the company now manages almost 8,500 mailboxes.