Strathmore called to task over Commsoft comparison

By Aimee McClinchy

Friday 17th March 2000

Listed technology company Strathmore Group has run into strife after likening its investment Commsoft with unrelated ASX-listed company Telemedia.

Strathmore directors have publicly compared their company Commsoft with Telemedia and the connection has been picked up in investment reports by brokers JB Were and DF Mainland.

The comparison has angered Telemedia's chief executive Chris Jones, who said he does not want his company caught in the dot.com hype.

New Zealander Mr Jones, who listed his telco software and equipment company on the Australian stock exchange last year, said Strathmore's claims could see them fall foul of listing rules when Commsoft approached its IPO.

Telemedia, which has a market capitalisation of more than $A366 million, was not in the same line of business as Commsoft and its revenues could not be compared, he said.

"They are not in my industry, they are not my competitor. Saying that sort of thing, the ASX will nail you," Mr Jones said.

"They sell to the business market, we sell to telcos. We're in enhanced telco services. People think we've suddenly arrived in the dot.com hype but we haven't. We've been selling in this sector for over 10 years," Mr Jones said, adding he had received an unsolicited apology from Strathmore.

Strathmore chairman Phil Norman, when asked for confirmation, said he "did not think it was appropriate or helpful to comment on secondhand information through the media."

Mr Jones said he voiced his concerns because his company, trading at $A6.15 earlier this week, was chasing significant market share and securing international deals.

Telemedia announced sales revenue of $A5.6 million for the six months ended December 31, 1999, and is forecasting $A23 million for the year 2000 on global sales.

It has a strong New Zealand client base, with partners such as The Warehouse, Telstra and Vodafone, but did not list locally because of this country's lack of tax breaks and scale.

It is now well established in Australia and Mr Jones said Telemedia would soon announce its strategy for Latin America. That would see all geographic regions except North America covered.

Recently, Telemedia won a second contract in Hong Kong with Asia Touch International. It earlier formed a strategic alliance with KDD Network Systems, a subsidiary of KDD Corporation, Japan's second largest telco.

Mr Jones hadn't expected the amount of growth in Japan. "It will contribute 20-40% of our revenues this year.

"North America is the one that's the most difficult but I'm sure we will define very shortly what that market looks like."

Analysts say Telemedia is heading for a Nasdaq-listing. Mr Jones was reluctant to comment.

Merrill Lynch's investment report said if Telemedia achieved predicted sales of $200-300 million over the next few years, its shares could trade in the region of $18-$27.

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