George and Ian catch up on recent news and events in UK small and mid-cap tech and discuss the (limited) SaaSpocalypse scenarios for Cerillion, DotDigital and GB Group – a few of the UK listeds that have been seen their share prices caught in the crossfire.

Cerillion might look to techies to be an easy AI technical target its business model, market position and end customer knowledge give it a major moat. DotDigital and GB Group are collections of mainly less than bleeding edge technology solutions, but there is considerable value in their established market positions. GB Group is sorting itself out whilst DotDigital faces the challenge of how to keep top line growth growing in a business area that is seeing constant innovation and change, but neither looks to be facing fundamental challenges from AI.

George and Ian consider the Saint Valentine’s day tech massacre.

In face of the carnage, we take a step back and remember that writing software is only part of the story. You need to plan, develop, test, sell and maintain. AI is untested in customer support for AI and much else besides.

We have flashbacks to when Open Source became a thing and look to the SaaS transition and lessons learned and not learned.

There is value amongst these hard-hit tech software stocks, but survival and growth in the face of AI is more than about having embedded products. It’s also about the company structure and culture, and scarily for UK investors, its code base too.

We consider the realignment of earnings multiples. After over a decade of analysts and investors assuming SaaS revenues go on forever, it’s now increasingly obvious that many software companies can and will die, and it might be messy.

George and Ian take comfort from FY25 trading updates but look forward to a year in which reality may bite back.

Trading updates from Raspberry Pi, and news flow from Intel and Samsung, remind us that things rarely happen as smoothly or as predictably in real world tech as is hoped – particularly in semiconductors.

Computacenter’s update has confirmed George’s view on hardware sales and serves as another illustration that cash flow matters and should not be taken for granted.

Looking to the US the traditional SaaS stocks are underperforming, dragged down by the question of what AI does to them and, importantly, software pricing. No sign of the market asking these fundamental questions of the UK stocks just yet.