It is going to be a rough ride for Logica's messaging business going forward

John Hayes F&C Management.

Logica, one of the remaining three technology firms in London's blue-chip Ftse index, is the global leader in text messaging software.

The company said on Wednesday it expected growth at the unit, which accounts for almost a third of total sales to be modest "at best" because of an anticipated decline in Japan.

"This is largely due to the earlier and greater than previously anticipated impact of network-wide capital spending constraints in the Japanese market, which will result in a revenue decline in Japan compared to last year", the company said.

Logica's major client, Vodafone's Japanese subsidiary J-Phone, is expected to half its capital spending this year.

"The outlook is very disappointing,'' said Gunnar Plagge, an analyst at WestLB Panmure.

Losing dominance

The company's chief executive Martin Read would not give any further details about the growth rate for the mobile unit, which provides software for every second text message in the world.

But Mr Read said it would be below 30% which was the reduced forecast given in December from 40%.

Shares in the company have lost more than 40% since December.

The lower forecast makes analysts question the future of Logica's dominance of the text-messaging market.

And analysts have noted the firm is not investing as heavily as some of its competitors into the development of the new generation of messages, which are able to transmit images, video and audio clips to mobile phones.

And some analysts fear that Logica will lose its position as market leader.

The rival Anglo-Dutch CMG won a contract to provide Hutchison with picture messaging.

"It is going to be a rough ride for Logica's messaging business going forward", said John Hayes from F&C Management.

Taking gloss off results

The fears over the future of Logica's messaging division make the company's profit growth of 21% in the last six months of 2001 look less attractive.

The company's profit before tax for the period was �78.5m ($111.9m), slightly ahead of expectations.

Logica expected to see a solid performance in its computer service business, which accounted for a bigger share of revenue than the messaging division, but attracts less attention.