Shares in Logica, the UK's largest IT company, plummeted by 84p, or 17 per cent, yesterday after it warned of slower growth at its key text messaging software unit.
More than 60 per cent of the world's text messages are sent using Logica software, but the market is concerned that the company may lose its footing as the telecoms industry moves towards more sophisticated forms of messaging.
Although the company reported a 21 per cent increase in interim pre-tax profits, it confirmed that growth in its text messaging business would be "at best" modest in the second half.
The reason for the slump has been a lack of interest in its text messaging business in Japan. Revenue growth in the Japanese market fell to nine per cent in the six months to the end of December. In January its key Japanese customer J-Phone said it was halving its capital expenditure until 2003.
Sales for Logica's billing software for pre-paid mobile phones has also slumped as operators shift their focus towards higher-margin contract customers.
Although text messaging software sales grew 36 per cent in the last six months, the impact of the slow billing software business dragged growth down in its mobile networks unit to 28 per cent.
Growth in the second half was likely to fall "significantly" below this level, the company warned.
Logica said that it remained hopeful that strong growth in emerging messaging markets such as the Americas and eastern Europe would help offset the impact of weaker Japanese sales.
Chief executive Dr Martin Reed said: "Overall, the board is confident that it will deliver earnings per share growth at least in line with current market expectations."
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