Talking Tech

Ian and George catch up on small and mid-cap tech news. 

George has been looking at some resilient and upbeat news from smaller less well-known players SRT, Xaar and Microlise and is still recovering from the not too surprising news that Computacenter has not delivered its 20th year of earnings growth.

Gamma results have encouraged Ian and whilst enthused by Judges Scientific as a company he is disappointed by the analyst meeting – where did all the research go?

The leads to reflection on Ian’s recent blog comparing listed company micro-cap funds and VC funds, which suggests that something has gone wrong with the small-cap due-diligence / investment decision ‘stack’.  This has knock on impacts across small and mid-cap.  Is more research the answer?

George and Ian catch up on tech as it impacts UK small and mid-caps.

Recent events have seen the US market, and US tech and smaller stocks in particular, backtrace whilst UK’s Techmark index has gone up 5% since the start of the year.  Perhaps showing its worth as a shelter in times of trouble?

George updates on recent recruitment sector news, not great, but reminds us that elsewhere individual stocks where there is management change or revitalization can be interesting – pointing to NetCall and PCI Pal amongst the small-caps and the once giant Capita, also amongst the small-caps.

Ian revisits UK electronics and electricals: Spirent, Spectris, Renishaw et al. It leaves him puzzled at their lack of interest in talking about AI. Aren’t those involved in measurement and data generation going to be the lifeblood of industrial AI and for those with semiconductor manufacturing equipment companies as customers isn’t it AI that’s driving, or at least supporting, their top line now.

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George updates us on PLC awards winners – all well deserved and fingers crossed for none of those traditional subsequent share price declines.

Ian looks at the strategic reasons for PINE Pinewood's acquisition of Seez and the issue of where the value really lies in AI. Should investors be calling the quality of the acquisition decision now?

This leads George onto how AI is impacting the tech services companies and to where the real AI driven growth is going to come from for the software providers.

Crash landing back onto planet small-cap, they touch on the stories which are truly AI related, like KX, and the damage that can be done to portfolios and companies when management find themselves ‘managing to the broking story’. 

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This week George and Ian catch up on recent tech newsflow and consider its impact on the UK small and mid-cap tech stocks.

George scans the wider market and whilst somewhat downbeat on the fact that the big boys in IT services are struggling to get back to where they were before the pandemic, at least in the UK the government looks to be spending some of the money it hasn’t got on tech – giving some grounds for optimism amongst the smaller companies, including Made Tech.

Ian scratches his head on Palantir’s business model and ponders just how dependent it is on share-based remuneration and how far and how fast does its non-conformist customer base have to grow to justify 70x sales. He also considers small-cap silicon play, Ensilica, a real tech company with the wrong balance sheet. Share price movements following announcements and forecast revisions suggest that the investors and wider market might have a better handle than the brokers on how the semiconductor industry works. 

George and Ian discuss recent results and look at more detail at Oxford Metrics and FD Technologies.

Oxford Metrics (OMG) has faced head winds as it returns to ‘normal’ after the pandemic and supply chain issues. But it also now has the opportunity in smart manufacturing.

Historically Oxford Metrics has had strong positions in relatively small global markets, the move into smart manufacturing offers the opportunity to build a significantly bigger business in an application that is at a technological tipping point.  A classic growth hardware and electronics story that needs good acquisitions and good execution.

FD Technologies (FDP) is focusing down upon its KX database business. The market looks to have picked up on the Total Addressable Market not the Serviceable Obtainable Market. Huge difference, and one that the management themselves don’t seem to have a grip on yet. On top of that its investors (or management) could well be killing the hypothetical golden goose.

If you want companies with growth valuations you have to give them the funds to drive the growth. The valuation suggests huge market opportunity, and there clearly is a significant one. However, the limited cash allocated after the post disposal distributions to drive sales suggests nothing of the sort. Tens of millions of sales and marketing will deliver exactly that in terms of revenues. Something’s got to give.

Time Stamps:
00:00 Introduction
01:15 Oxford Metrics (OMG)
07:38 FD Technologies

George O'Connor and Ian Robertson discuss Sage results as well as other recent newsflow.

Sage’s share price rose 19% on the day with the market liking it more than the analysts. Much of the debate is around the cloud native growth narrative but have the company and analysts painted themselves into something of a corner?

Nvidia results get a mention. It's been the big thing in 2024 but what’s to come in 2025? Will it be the year we finally look beyond the chips?  

Discussion of the ‘future’ leads us to Deferred tax loss assets. These get recognised when the profits are probable. No probable profits mean no loss-based asset.  Crucial to small cap tech you would think but often ignored. We look to Bango, Cirata and Ocado as examples.

The pair bring their discussions to a close with a glance ahead to 2025. Will the sector continue to be driven by geo-politics? Ian dares to suggest that things might just be 'normal' and George summarises the chat with a call to action: Just get on with it!

Companies discussed include: Xero, Tracsis, Sage, Nvidia, Eagle Eye, Intuit, MadeTech, Redcentric, Snowflake, SoftCat, Intuit

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George O'Connor and Ian Robertson discuss Q3 Tech news.

They talk about the impact of the UK Budget and then the US Election on the tech sector. AIM rallied ater the UK Budget but then gave up the gain as American institutional investors who've been buyers of UK tech this year, suddenly found a reason to go back home with tax cuts promised to US companies. 
 
As some of the larger US tech companies report, Ian and George look for more evidence of what's happening with AI and where it is on the 'hype cycle'. There's a a lot spending on Data Centres, but what's going on beneath the surface? What is being promised to customers? How sustainable are business models? Is there now more evidence of proof of concept and where the returns are going to be? 

Companies discussed include: Kainos (KNOS), TPXImpact (TPX), Triad, S4 Capital, Team Internet (TIG), Microsoft, Meta, Amazon and Google 

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If you enjoyed listening to the Talking Tech podcast you might like to take a look at the accompanying Talking Tech insights.

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George O'Connor and Ian Robertson catch up on recent Tech news. 

Ian sees some common themes with Pinewood (PINE) and Made Tech (MTEC) results – looking at sales processes and how much more difficult it is to sell software than services, and how lines can become blurred.

George looks to the results of TCS (Tata Consultancy Services), the services behemoth and ponders an industry regaining its mojo, before considering FD Technologies (FDP) disposal and focusing on KX (AI again!).

After a quick chat about the 'Rule of 40' data in Ian’s recent blog (positive for UK but not Rule of 40 obsessives), George sums the tech sector up with a bit of poetry:

‘When she was good, she was very, very good

But when she was bad, she was horrid’
  

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If you enjoyed listening to the Talking Tech podcast you might like to take a look at the accompanying Talking Tech insights.

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George O'Connor and Ian Robertson catch up on recent Tech News after the summer break.  

They consider Gamma Communications and IQE and what some might see as the difference between a good stock and a good business.  Even though a company can lay claim to great IP and great tech, it is just as likely, if not more, that it is the position in the value chain that will determines its quality and value.  

The prospects for Computacenter achieving 20 years of consecutive earnings growth are also discussed – along with share buybacks.

George reflects on the mixed bag of news in recent UK company announcements, and they look forward to Raspberry Pi results which have the potential to upset far more than just the investor base if they don’t match or exceed expectations this coming week.

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If you enjoyed listening to the Talking Tech podcast you might like to take a look at the accompanying Talking Tech insights.

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George O'Connor and Ian Robertson catch up on recent Tech News, discussing stock and sector rotation in tech and the semiconductors industry.

Having reviewed Allianz Tech Trust and Polar Capital Tech Trust recently, George looks at divergent performance in the sector and the big focus and interest in semiconductors. And with so much going on but so little clarity in the sector, Ian questions whether now is the time to start looking beyond the Mag 7 for AI plays (to a Mag1000?) and finds this might require something of a whack-a-mole approach. He also discusses ASML (see recent Talking Tech Insight) and considers how, when and whether the wider semiconductor industry will follow Nvidia’s path.

Companies mentioned:
CML Microsystems, HSW Hostel World, RPI Raspberry Pi, Nvidia, Travel Tech, AirBNB, Equinox, Rackspace, Data Analytics, ThoughtWorks, Palantir

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If you enjoyed listening to the Talking Tech podcast you might like to take a look at the accompanying Talking Tech insights.

Brought to you by Progressive.