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France Telecom Unit Bets on Business Technology Spending in Five-Year Plan
France Telecom SA’s business services unit aims to ride a wave of corporate investment in information technology and communications as it begins a five- year growth plan.
The biggest corporate clients are “cautiously optimistic” about economic conditions and planning to catch up on deferred investments, Vivek Badrinath, head of France Telecom’s Orange Business Services unit, said by phone. The unit today unveiled a plan to increase revenue from cloud computing, emerging markets and “machine-to-machine” applications for mobile communications technology by 2015.
“In many cases the technology demand is back now, and that is what we are hoping to harness,” Badrinath said. “I think things are waking up after a period that’s been quite cold and cautious, and the big corporate clients are becoming more active in this space.”
While many U.S. companies are still hesitant about spending on new technology, their European counterparts are demonstrating “an appetite for investment that’s increasing again,” he said.
The largest French phone company is trying to build new sources of revenue as growth slows in its home market. Chief Executive Officer Stephane Richard has said the company will spend as much as 7 billion euros ($8.9 billion) on deals in Africa and the Middle East as part of a plan to double emerging-market revenue.
Acquisition Strategy
Within the enterprise unit, “our acquisition strategy is going to be focused on certain technologies that we need or occasionally access, and expertise,” Badrinath said. “We don’t see major consolidation opportunities at this stage.”
First-half revenue from enterprise services, which include videoconferencing and data-management, fell 6 percent from a year earlier on a comparable basis to about 3.6 billion euros, or 16 percent of total sales.
The Business Services unit is targeting sales of 500 million euros by 2015 for cloud computing, where clients store data on external servers to avoid the cost of maintaining their own, and 1 billion euros of sales from emerging markets. The company doesn’t disclose the current revenue totals in those areas.
About 40 percent of public- and private-sector organizations in Europe are planning to increase spending on external technology services this year, according to Gartner Inc. Almost a quarter of organizations expect to decrease their information technology services budgets, according to the market research firm.
Orange Business Services’ strategy through 2015 includes a goal of deploying 10 million SIM cards in the machine-to- machine market, to wirelessly connect appliances to each other, a trend other companies also aim to exploit.
Intel Corp., the world’s largest chipmaker, estimates that chips “embedded” in devices such as cars, gas pumps, and signs will account for $1 billion in revenue this year.
To contact the reporter on this story: Matthew Campbell in London via mcampbell39@bloomberg.net.
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