Telstra offloads Kaz for $200 million to Fujitsu

Staff Writers
Monday, 02 March 2009 03:59

IT Industry - Deals

Telstra takes a hit of $130 million with its announcement that it is offloading its IT services arm, Kaz, to Fujitsu for $200 million. The announcement comes after nearly five years of Telstra trying to justify its decision to purchase what was then the biggest local IT services player.
UPDATE - Telstra sent iTWire a message reminding us that today’s announcement follows the sale in August 2006 of KAZ’s superannuation business Australian Administration Services for $215 million.

Telstra’s long-running attempt to sell the troubled Kaz Group came to fruition this morning when Fujitsu announced that it has entered into an agreement to acquire 100 percent of shares in Kaz from Telstra for A$200 million, subject to regulatory approval.

Telstra acquired Kaz for $330 million in 2004 and has spent much of the time since then trying to sell the business, despite, at different times, various executives saying it was keeping the company, including the chief financial officer, John Stanhope, only six months ago assuring the market that Telstra had “decided to keep Kaz as a key offering in the enterprise market.”

As had been predicted by some market pundits when Telstra first acquired Kaz, the previously successful services company, founded by Peter Kazacos in 1988 and listed on the ASX in 2000, has not performed well under Telstra's stewardship. Pundits had correctly suggested that under Telstra many of the best and brightest talent at Kaz would depart leaving just a shell of the former company that had made its name because of its people.

Telstra's IT services group, of which Kaz is a major part, dropped nearly $80 million in revenues in the 2007/08 financial year.

Fujitsu, a provider of business, information technology and communications solutions, says the investment in Kaz confirms its commitment to invest in and grow its Australian business as well as boost Fujitsu’s position in the Australian market. The company says the acquisition will make Fujitsu the third largest IT company, by revenue, with a team of nearly 5,000 across the country.

Richard Christou, Fujitsu’s senior first vice-president and president of global business, maintained the expanded customer base and enhanced end-to-end end capabilities would bring a new level of competition to the Australian market creating better value for existing and future customers.

“The strength of KAZ’s existing business and the synergies it brings to Fujitsu will deliver new and exciting commercial opportunities. The deal also creates a strategic alliance between Fujitsu and Telstra that builds on the existing working relationship and provides new opportunities in the Australian market.
 
Christou also maintained that with a strong track-record working with Australian governments, particularly at the state level, the acquisition of KAZ gives Fujitsu “enhanced service capabilities for federal public sector opportunities and a strong physical presence in Canberra.”