It has been four long years since the dot-com and Y2K bubbles burst and chief information officers began slashing their IT budgets. The sector has been put through the grinder, and then put through it again for good measure.
2004 was meant to be the year in which the industry returned to growth, albeit measured. Most research firms indicated that companies would open their wallets again for the first time in years as their existing equipment - from PCs to back-office equipment - began creaking under the weight of demands on their information systems.
But five months into 2004, it's still not clear whether the industry is emerging from hibernation or whether the long, cold winter still has some way to run.
If one were to look at the share prices of big-name technology companies as an indicator of the health of the sector, one could be forgiven for thinking all was well. Shares of IT companies in SA, as well as in Europe and the US, have staged a remarkable recovery in the past 12 months.
Dimension Data (Didata), for example, has risen 115% (R3,65/share at the time of writing) since its low point set in March last year.
Didata appointed Brett Dawson as CEO during the year, but it was also announced that company founder Jeremy Ord would stay on as group executive chairman. This seemed to flout corporate governance guidelines, which advise not only that the CEO and chairman roles should be split, but that a nonexecutive chairman should be appointed.
In practice, however, it seems that Ord has indeed left Dawson to get on with it. It may be that he sees his own role as looking after key partnerships and relationships, interacting with shareholders and investors, being a mentor to Dawson and offering help to other executives.
Rival Business Connexion (formerly Comparex; R4,75) has slipped 3% since its 2003 low point, but this is largely due to the fact that it has paid two special dividends to shareholders worth a combined R6,50/share.
Datatec (R9,50), the third of SA's big three tech stocks, has climbed 157% since it bottomed.
Shares listed on the Nasdaq, the technology-laden stock market in the US, have also performed well. The big computer vendors, such as Dell and Hewlett-Packard, have risen sharply in the past year. Semiconductor giant Intel, an industry bellwether, has seen its share price rocket.
Despite this, the mood in the industry, particularly in SA, is still sombre. Industry executives say sharp increases in desktop and notebook PC sales in recent months - driven by the strong rand and falling PC prices - have not yet translated into meaningful spending in the back office.
Though more companies have started showing interest recently, asking their suppliers for information, tenders for large projects are still as rare as hens' teeth.
The companies that focus on back-office infrastructure and related services - and in SA that tends to be the bigger of the listed IT entities, such as Business Connexion and Didata - are therefore unlikely to shoot the lights out with their financial performance any time soon.
The recent improvement in the value of these companies' shares is attributable to the fact that they were heavily oversold rather than to any great improvement in their financial positions. Another reason is that people were expecting a return to IT spending by corporate SA.
Business Connexion CEO Peter Watt told the FM in April that the industry was "still bumping along the bottom", though there was a "glimmer of light on the horizon" in the form of growing interest from corporate SA. This interest had yet to turn into buying. And his deputy, Benjamin Mophatlane, said there were "far too many external factors", such as the precarious state of the world economy, that could undermine any recovery.
There is hope, though, that companies will start spending soon, given that PC sales have in the past signalled better times to come for the sector.
The results of this year's Top Companies survey reflect the troubles in the sector. Only one of the big three listed firms, Business Connexion, shows a profit.
Mustek, maker of the popular Mecer brand of PCs and peripherals, is this year's top IT company, ranked by net profit.
However, the company's performance on our list - it knocked last year's star performer, smart-card company Aplitec, into third place - is in large measure due to the poor state of the IT services business and the companies that operate in that space than it is to the recent rise in PC sales. Still, in the year to June 30 2003, Mustek's headline earnings per share rose an impressive 33,5% on sales that rose 15%.
The situation deteriorated markedly in the six months to December 31, however. The company was hit with a R62m charge caused by its forward-cover policy on dollar-denominated components. Though PC sales rose - year on year, Mustek claims it sold 13,8% more desktops and 29% more notebooks - revenue slumped 18% on the preceding period, from R1,4bn to R1,1bn. Operating profit was virtually wiped out, falling from R111m to R2,9m. Headline EPS fell from 75,4c to 8,3c.
Despite the numbers, CEO David Kan is bullish about the prospects for Mustek and for the market generally, saying increased PC sales will flow through into other areas of IT, such as networking. Still, Mustek will have to do something spectacular in the second half if it is to retain its top ranking in next year's survey.
Business Connexion, fresh from its successful acquisition of the black empowerment group of the same name, came second this year. Aplitec, which is planning to list soon on the Nasdaq, slipped from first to third place. Bytes Technology Group, which has undergone a remarkable turnaround in recent years under CEO David Redshaw, and Datacentrix, recently rated SA's most empowered IT company, rounded out the top five.
