EOH tanks after talks with Microsoft yield nothing

JSE-LISTED technology services company EOH Holdings slumped to its lowest levels on the bourse in one year after its talks with Microsoft failed to yield positive results.

The company’s shares extended losses for the fifth straight day, falling 10.41 percent to R17.47, after the group said the multinational technology giant Microsoft had still not officially provided it with any reasons for the cancellation of two contracts last week. EOH’s stock has fallen 34.59 percent in five days, slashing the company’s market capitalisation to the current R3.08 billion.

Two weeks ago EOH reported that Microsoft had notified its subsidiary EOH Mthombo that it was planning to terminate the company’s Channel Partner Network agreement within 30 days.

EOH said the cancellation would hit its profits by R10 million, sending the shares into a downward spiral that saw them closing 30 percent lower.

However, the shares recovered 15 percent on Friday after the group announced that it was working with Microsoft in a bid to understand the concerns and rationale for the action. EOH has been a Microsoft partner for the past 20 years and is the largest local partner by skills.

The group said chief executive Stephen van Coller had been engaging Microsoft to seek further clarity.

“Following a recent fruitful meeting between the EOH and Microsoft leadership, Microsoft has advised that it is taking the EOH proposals under consideration and further review. EOH has proactively initiated an internal investigation, supported by ENSafrica, into EOH Mthombo´s Channel Partner business unit,” the group said on Friday. But yesterday the group admitted that Microsoft had not officially provided it with any confirmation for the reasons for the notice.

“Microsoft has still not officially provided us any confirmation for the reasons for the notice. This matter is now sub judice. ENSafrica continue to give us regular updates and we are committed to swift and appropriate action,” the group added.

It said ENSafrica would continue to look at all large historical licensing contracts in the public sector vertical.

Van Coller said shareholders would be advised if there was any progress on the talks with Microsoft. “I again encourage anyone who has evidence to please come forward so we can root out any historical, unethical business practices both within EOH and the broader country,” he said.