Byron Kennedy: Moneyweb Reporter


BROADCAST TRANSCRIPT: Byron Kennedy, my colleague at the joins us now. Byron has been watching IT shares through a rough day for that sector. Byron, Dimension Data obviously the big mover. What were the others?

BYRON KENNEDY: As you mentioned, Didata was down about 8% today, but MB Technology off 4% and Faritec losing 3%. Datatec is the second-largest IT stock listed on the JSE that was off one and two-thirds of a percent ? it had taken a bit more pain during the day, but pretty light volumes going through those that I mentioned. Didata obviously dominating affairs, R52m worth of trade going through and trading at a five-year low.

MONEYWEB: Do we know why Dimension Data fell? John Clemmow gave his version of events – does yours differ largely from that?

BYRON KENNEDY: No, it’s pretty similar. I’ve spoken to a number of traders today. Obviously we had Intel’s profit warning coming out in the US overnight. Before that came out, the Nasdaq fell 2.5% ? it’s off about 2.5% at the moment. So big pain being taken there. So the sentiment being carried over to the JSE and what the guys are saying is that, if Intel has put out a profit warning, Cisco Systems might follow suit, and Cisco and Didata, their share prices have correlated quite closely because they tend to operate in the same kind of space. So it’s also got some people thinking that perhaps Didata will be in the same boat. But Bruce, I really can’t stress enough that that is pure speculation at this point in time. But another reason for Didata’s weakness could also be purely from a technical basis, and that’s that Didata has smashed through all its key support levels and, really, it’s in no man’s land at the moment, with Didata down at those five-year lows. That in itself will trigger sell signals for those traders that swear by technical analysis. I spoke to Arthur Buchner from BoE Securities today, and he said that shares often become very oversold when that happens, and he reckons Didata is a steal at these levels. On the other hand, one of the technical analysts that I use on Tradingweb, that’s Gregor Krell from NIB Securities, he says he wouldn’t be surprised if Didata fell below R5 a share. Offhand, I’m not quite sure what Didata’s cash value is, but there must come a point where perhaps a Cisco might start sniffing around and look at perhaps acquiring Didata. Bruce, maybe we will have another Idion versus DataMirror on our hands. But again, pure speculation.

MONEYWEB: Byron Kennedy, and his website ? full of interesting facts and figures, technical analysis and, as Byron said, he’s been talking to the technical analysts in recent weeks. They’ve been warning that Dimension Data could come under pressure, that indeed it has, whether or not it gets quite as bad as Gregor Krell suggested is a matter of time. But Arthur Buchner from BoE Securities ? he thinks it’s a buy at the moment. You’ll have to pay your money and take your chances.

Posted in Market commentary

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