Total assets of the group as at December 31st, 2000 amounted to $5,162,163 including fixed assets of $2,735,728 compared with total assets of $5,087,025 and fixed assets of $2,462,050 a year ago. The Company had cash and time deposits of $447,199 as at December 31st, 2000 compared with $446,164 last year. Shareholders' equity has increased from $2,020,070 to $2,066,974. The company paid dividends of $60,000 in the year, however, in July 2000, the Directors voted to suspend quarterly dividends to ensure that the company had sufficient cash to fund its continuing investment in Transact-e-Biz.com (Bermuda) Limited.
BCS Agencies Limited
This subsidiary company handles all IBM Agency business, excluding PCs and e-commerce. The contribution to earnings (before corporate overheads) amounted to $508,403 as compared to 1999 when Agency earnings totalled $370,000.
BCS Agencies Limited experienced a business climate in Bermuda similar to that experienced worldwide by our global-reaching partner IBM. In the words of IBM's CEO Lou Gerstner, "it turned out that last year was, in a word, unique". The hardware, software and IT services business saw a drop-off in customer demand as many large customers had put a freeze on big-ticket technology purchases heading into the new millennium and that persisted until almost the middle of 2000.
Then the inevitable happened, and some of the pent-up demand that had been building as customers delayed key IT initiatives came into being during the last half of the year.
BCS Agencies was able to work with many of our existing customers as well as open some new markets in an effort to deliver total system solutions as the marketplace slowly started to revitalize its technology position.
Investments in IBM's eServers, lead by the iSeries (previously branded AS/400) and the pSeries (previously branded RS/6000) accounted for much of the growth in hardware sales. Considerable growth was also realized in the IT services and consulting areas as we responded to customer's requests with not only our own local, certified, services professionals, but by drawing on the skills available through the IBM Global Services Team.
E-Business continued to be at the forefront of many of our Bermuda customer's strategic objectives. Although dampened by the "reality check" that occurred worldwide by the failure of some dot coms that grew beyond their means, the local requirement has emphasized the integration and transformation of business models to accommodate the Internet. Together with IBM and our local sister-company, Transact-e-Biz.com, BCS Agencies has started to work closely with our customers to help them realize the true possibilities of e-business.
BCS Agencies grew both its sales force and its services team during 2000 primarily through the employment of Bermudians. Our challenge, however, still remains our ability to provide the necessary skill sets to meet our customers' requirements. This requires a delicate balance to attract, train and retain local resources as well as acquiring the capabilities through our various links and partnerships - both local and abroad. Managing the costs and complexity of technology is as important to BCS Agencies as it is to our customers and we must strive to meet this challenge if we wish to survive in this increasingly competitive environment.
The Computer Centre
This division of the Company handled sales and service of IBM Personal Computers and other related peripherals. During the year under review, sales of Personal Computer products continued to decline resulting in an operating loss of $148,892 compared with a loss of $556,199 in the previous year.
Globally and in Bermuda the personal Computer market place is going through significant changes which are adversely impacting sales/services revenues and gross margins. The Internet continues to expand and mature, offering both consumer and corporate customers much more flexibility in the purchasing process. The lack of PC product differentiation, reliability and usability allows customers to risk purchasing over the Internet or demand higher discounts from local (and offshore) dealers. In light of these trends the Directors decided to disengage from the IBM Personal Computer business and focus efforts on our core competencies; IBM Mid Range Systems and Professional Services.
Transact-e-Biz.com (Bermuda) Limited
In July 2000 we advised Shareholders that the payment of quarterly dividends would be suspended, "until Transact-e-Biz.com is profitable or we decide to refinance the development cost of this new business". We further noted that we anticipated entry into the market at the level noted would cost a minimum of $1.5 million and our initial investment of $450,000 for equipment is only a small part of the total investment to be made. Substantial cost will come from marketing our services to customers around the world, recruiting additional highly skilled technical staff and continual training and certification of staff to ensure that we can provide the very best service and solutions to meet the needs of our global customers. The significant but not unexpected loss of $317,903 for the year is, therefore, no surprise for we incurred development costs of $253,052 in 2000, which have been expensed as incurred. Included in the development costs are interest and rent paid to the parent company amounting to $26,862.
Delays in negotiating an agreement with AT&T Global Network Services continued throughout this year. This segment of Transact's business has consumed a disproportionate amount of management's time and has not been profitable. Transact is investigating alternatives as a result of this challenge. Bermuda's fibre optic links to the US have traditionally been and continue to be expensive, although the Bermuda international carriers have been reducing their price for bandwidth and the cost of commercial Internet has declined. We continue to look forward to growth in our core business and to the immergence of new opportunities as the cost of communication to and from Bermuda is reduced.
The business environment in which the Company operates was one of exceptional exuberance and tremendous investment in 1999 and early 2000 - for virtually any business that incorporated the phrase "dot com" as a part of its name. This was followed by disillusionment and in the late fall of 2000 the bubble burst. "Dot com" stocks crashed and took with them most Internet related businesses and as predicted, many companies have since gone bankrupt as the dot com companies rapidly burned through millions of dollars in start up capital.
Bermuda had high hopes of becoming a premier e-commerce site, however, as the year progressed, it became clear that Bermuda's e-commerce industry would take much longer to develop. Transact has been very frugal with its shareholders resources. While the company's losses in 2000 are significant, it must be noted that these losses are largely due to the development costs referred to earlier and these costs have not been wasted. The company has invested in state of the art infrastructure and in staff certification training. Transact's core business is managed hosting, server management and storage management. The software for these service offerings is the Tivoli suite of products. Tivoli enterprise products are considered among the very best in the world for the services mentioned earlier.
Our quality state of the art services along with our professional proposals are world class. A major company that had planned to come to Bermuda chose Transact to manage its e-commerce platform. This customer said, "We chose Transact to design and manage our infrastructure in Bermuda because of its professionalism, highly trained staff and for its world-class solutions". For these same reasons IBM has chosen Transact as its hosting and server management business partner in Bermuda.
In 2001 Transact will focus on its core competencies of hosting, server and storage management. Transact will extensively market its service offerings in Bermuda and abroad.
At the Board Meeting on 6th April, Mr. William D. Thomson stepped down from the Board of BCS Limited although he remains a Director of BCS Agencies. We are pleased to welcome Mr. Wendell Brown who was appointed a Director of BCS to fill the vacancy created by Mr. Thomson's retirement from the Board of Bermuda Computer Services Limited.
Our thanks go to all our staff who have worked hard to achieve the results reported.
Susan D. Wilson Aaron Smith
President General Manager