A shake-up of the top techs

TOP 1000/TECHNOLOGY:PC MAKER Dell is Ireland's largest technology company by revenue year, according to our Top 1,000 Companies ranking, having overtaken Microsoft.

While the Texan firm was one of our largest exporters during the period when all its manufacturing for Europe, the Middle East and Africa was carried out in Limerick, 2009 dawned with the devastating news that production was to be moved to the Polish city of Lodz, with the loss of 1,900 jobs.

That shutdown is in train with all staff due to depart and manufacturing to cease by year-end. The historic nature of company reporting means that shift won’t be fully reflected in these listings until 2011 when companies’ 2010 accounts will be used for their ranking.

Dell’s position will most likely be taken by the world’s largest software company, Microsoft, which, with 2008 revenues of €11.3 billion, is just €16 million behind the hardware maker which is one of its biggest Irish-based customers.

In truth, however, Microsoft has probably already overtaken Dell. The €11.3 billion figure relates to Microsoft Irish Operations Limited (MIOL), which provides distribution and logistics support to Microsoft’s operations in 126 countries worldwide. It employs about 1,200 staff but another 500 work for Microsoft Ireland Research, an unlimited vehicle which carries out the company’s R&D activities here.

As an unlimited company it does not have to file accounts but earlier this year The Irish Timeslearned it paid Irish corporation tax of €108.2 million for its 2008 financial year – suggesting it made significant pretax profits.

Just over 10 years ago, Microsoft was a significant manufacturer in Ireland with production lines in Dublin producing DVDs and CDs which were boxed up and shipped overseas to be sold.

While the company has successfully morphed into other areas such as logistics, distribution, finance and development, such an option was never on the cards for Dell, which is primarily a PC assembler that requires low-cost production to maintain its razor-thin profit margins.

Another technology manufacturer – Intel – ranks at number six, just ahead of internet giant Google. Whether Intel’s €5.5 billion revenues shrink or grow in the next few years depends very much on whether is parent corporation makes investments in its Leixlip fabrication plants. Producing computer chips is a capital-intensive business and at least one of the fabs in Kildare is almost at the end of its productive life.

Any delay in Intel investment could see it overtaken by Google which had revenues of €5.28 billion in its most recent company filing. Google primarily sells into Europe, the Middle East and Africa from its Dublin operations although it does carry out some other technical activities as well so that expertise is available on a 24/7 basis at its offices around the globe.

One possible cloud on the horizon was Google’s establishment of a Polish operation in the city of Wroclaw which now employs 100 people and works closely with the office in Dublin. Google has said it was attracted by the availability of language skills. While Dublin has long been an attractive place for young multi-lingual Europeans to relocate, the economic downturn and resulting higher effective tax rates are making that more difficult according to recruiters. While the situation is not so bad that Google and others will imminently stop investing here it is something that our State development agencies will need to monitor closely.

Oracle, the US business software maker that has been on an acquisition spree of its major rivals, ranks at number 12 with revenues of €3.74 billion. That figure relates to its EMEA headquarters in Dublin’s East Point which carries out activities from localisation to telesales.

The only other technology firm to make the top 20 is again an Irish subsidiary of a major US player – the venerable IBM, which has had operations in this country since the 1950s.

Although Big Blue had revenues of €2.5 billion last year and does not disclose Irish profits, that underplays the significance of its Irish operations which have benefited from multi-million-euro investments in RD in the last three years. These are likely to be cost centres rather than revenue generators, at least in their early stages.

As well as developing software and new business processes at its Dublin software and innovation centres, IBM has won significant outsourcing contracts here from fellow multinationals such as Xerox and Telefonica O2.

The attractiveness of Ireland as a location for global technology businesses is confirmed with the appearance of major brands such as Kingston Technology (21), Apple (34), Symantec (37), Analog Devices (41), Adobe (44) and Hewlett-Packard (50) in the top 50. HP, which already employs 4,000 around the island of Ireland, recently announced the creation of an additional 500 jobs.

It would rank 27th with revenues of just over €2 billion but its Irish operations are split between four distinct legal entities Hewlett-Packard (Manufacturing), Hewlett-Packard Ireland, Hewlett-Packard (Galway) and Hewlett Packard Customer Services.

THE HIGHEST ranked indigenous technology company is London-quoted electronics payments processor Payzone which had revenues of €1.08 billion. But Payzone is heavily indebted, loss making and is looking to off-load subsidiaries, which may improve profits, but will revenues decline?

Other familiar names such as Horizon (177) and Iona (687) are still creating significant revenues but are now wholly owned by US firms.

Lobby groups for the local technology sector have long maintained that we need to build our own significant companies of scale if the sector is to be sustainable. Local hopes now turn to companies such as telecoms and technology service provider Calyx, ranked 399 with revenues of €105 million, and a crop of software companies such as Curam, Fineos, Openet Telecom and Norkom who hover around the €50 million revenue mark. These firms, which develop locally but sell on the international stage, have all seen growth in their revenues, although profits can still be elusive.

While the technology sector has fared better than most during the global recession it will be telling next year to see if the Irish companies can maintain growth or if international buyers will reserve their limited budgets to spend with the Microsofts, HPs and IBMs.

Even the big players will find the next 12 months challenging but with employment and other costs falling locally Ireland Inc will be looking to embed their Irish operations even more deeply into the local economy.