Colt Group is exiting the IT services market as it refocuses on its core network, voice and datacentre services activities.
Working with vendors including VMware, EMC and Symantec, Colt's IT services business provided IT infrastructure, platform and workload solutions for enterprises and channel partners, generating €77.8m of Colt's €1.495bn 2014 revenues.
But Colt confirmed in a stock exchange announcement yesterday that it will perform a controlled exit from IT services over the next two to three years, a move that will incur exceptional cash costs of €45m to €55m and a non-cash impairment charge of €90m.
Although Colt will honour existing IT services contracts, it will no longer tout for new sales or renewals, a decision based on the fact the business would need "considerable investment" and a belief it could not "compete successfully with a level of risk that is acceptable".
Having been planned since the start of the year, the exit appears to be unrelated to Colt's recent receipt of a €2.3bn takeover bid by founder and majority shareholder Fidelity.
"The fundamentals of our core Network Services and Voice Services businesses remain solid, and we are driving improvements in our Data Centre Services business," said Colt chief executive Rakesh Bhasin.
"We are taking decisive action to become a more focused and disciplined organisation which we believe will accelerate the performance of our Core Business. Overall, we believe the prospects for the Group are good and I am confident that, with the recent changes we have made within the senior management team, we will be able to deliver improved profitability and cash returns."
Analyst Megabuyte said it was "staggering" the move has seemingly produced no value for shareholders and that Colt is paying nearly €100m to shut down a €68m revenue business, but added the decision to exit IT services "comes as no great surprise".
Megabuyte added: "As we surmised at the time [Colt moved into IT managed services in 2012], the strategy required considerable investment, which Colt has now balked at making. In this context, it is no surprise that Fidelity would rather Colt work out its future away from the glare of public markets."
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