Colt is bowing out of the increasingly saturated IT services market

In a bid to increase profitability Colt announced this week that the company would exit the IT services market and put greater focus on its “core” services including its network, voice and datacentre services.

The company said its “managed exit” from the IT services market would also allow it to focus on offering datacentre services (colocation, cloud) and optimise use of its assets.

“Our IT services business would continue to need considerable investment in the short-to-medium term in order to deliver profitability and we do not believe this business can compete and grow successfully with a level of risk that is acceptable,” the company said in a statement Tuesday.

“Colt will continue to honour existing customer contracts through to termination, but will no longer seek new business.”

“The recent performance of IT Services has shown few signs of improving in accordance with the targets we set to deliver appropriate profit and cash returns in the medium term.”

The company anticipates the move will save about €25m annually, though it expects to incur cash and non-cash impairment charges of €45m to €55m and around €90m, respectively. Revenue from IT services is expected to decline €20m annually will become immaterial by 2018, it said.

“The fundamentals of our core network services and voice services businesses remain solid, and we are driving improvements in our datacentre services business. We are taking decisive action to become a more focused and disciplined organisation which we believe will accelerate the performance of our Core Business,” said Rakesh Bhasin, Colt chief executive.

“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,” he added.

Colt still owns and will continue to operate its 22 carrier neutral datacentres in Europe and 7 in the Asia Pacific region (including those acquired through Japanese IT services provider KVH last year), though its goal of moving away from IT services may also mean a pivot towards becoming more of a systems integrator, which – like the IT services market – is quite competitive, and it isn’t entirely clear how the company intends to differentiate from other large incumbents in this space.