Companies / 8 October 2019, 08:45am / Sandile Mchunu
DURBAN – Allied Electronics Corporation (Altron) yesterday benefited from EOH Holdings’ troubles, winning the multi-million-rand contract the troubled IT company lost from US multinational technology giant Microsoft.
Microsoft announced yesterday that Altron would replace EOH as its licensing solution provider (LSP) in South Africa. Altron did not disclose the value of the contract.
In February, Microsoft terminated the contract with EOH after an anonymous whistle-blower reportedly filed a complaint with the US Securities and Exchange Commission about alleged wrongdoing, involving a R120 million contract with South Africa’s Department of Defence.
Chief executive Mteto Nyati said the contract came as Altron was positioning itself as a leading IT company in the country.
Nyati said the group established Altron Karabina to be the go-to partner for everything that Microsoft would require.
“This LSP contract will position Altron Karabina as partners to customers that embark on digital transformation. Customers invest in technology to increase sales, improve operational efficiencies, transform customer and employee experience and drive innovation. Altron Karabina will help them extract business value quicker,” Nyati said.
Microsoft’s cancellation of its contract with EOH subsidiary, EOH Mthombo, saw EHO stock tumbling 30 percent on the day, wiping billions off its market capitalisation.
Last year, Altron announced the acquisition of iS Partner for R225m in a deal that included Karabina Solutions, a Microsoft solutions business and Zetta Business Solutions, which provides data advisory services.
Altron said Bytes UK would be Microsoft’s biggest LSP partner in the UK, a position the technology company plans to extend to South Africa.
“Altron Karabina is working closely with Bytes UK to duplicate their success locally,” the group said.
Peter Takaendesa, a portfolio manager at Mergence Investment Managers, said the awarding of the Microsoft LSP to Altron was largely expected.
Takaendesa said Altron had already become one of Microsoft’s key partners in the UK, and the group was obviously benefiting from the termination of the EOH contract.
“Microsoft has many other service providers in South Africa, including Telkom-owned BCX, and Altron will join that group to license Microsoft software as well as provide related services,” Takaendesa said. “The profit from this LSP deal alone will initially contribute a small part of Altron’s profits as licensing is a low-margin business for Microsoft’s channel partners, in line with EOH’s disclosure of the potential impact of the cancellation of their LSP.” He said the contract would offer Altron more potential for long-term growth, as the group would gain insights to provide services that run on top of Microsoft licences to its clients.
Altron Karabina managing director Grant van der Wal said being appointed as an LSP ushers in an exciting time for Altron Karabina.
“The LSP licence allows us to launch our software services division, adding to our Microsoft competencies in data and analytics, artificial intelligence, customer relationship management, ERP, modern workplace, Azure, and DevOps,” Van der Wal said.
Altron shares rose 2.34 percent on the JSE on Monday to close at R25.84.