No point in beating around the bush.

If you ask me about my reactions to Datrontech's profit warning, I must admit I was surprised because I presumed that UK IT distribution companies were all in the same boat and doing reasonably well. In addition, Datrontech has a very good reputation in the market and has, until recently, been optimistic about business levels.

As to the timing of the announcement precipitating a fall in share price, well, there is never a good time to issue a profit warning. It is always a ghastly thing to have to do - especially in regard to your shareholders. But the rules are that if you have an inkling that forecasts may not be met, you must make a statement to that effect.

Broadly speaking, whenever there is a downturn in the market, businesses have to weather the effects. But in our business no two distributors are the same and the extent to which they are affected depends on how much 'value' they are adding to their customers.

In my mind, value and profits are very closely connected - the less value you add, the less profit you are able to make and vice versa. While I'm not saying this is why Datrontech was forced to issue the profits warning, I would say that, from past experience, when Ideal has lost some focus on its core business the result has been less loyalty from customers and a subsequent downturn in profitable business. I agree with Mark Mulford, Datrontech's chief executive, that distributors need to work harder at their core business of reducing the cost of transacting business.

In the announcement, Datrontech stated it had seen sales plummet compared with the first four months of the year. It said this was in common with other distributors of PC-related products.

I cannot speak for the other UK IT distributors but, from our point of view, I cannot agree with this. As we said in our announcement to the Stock Exchange on 13 August, 'Ideal has continued to trade strongly throughout the final quarter (May to July) at margins within the company's target band.'

In my opinion, this period of strong trade reflects the fact that we have seen the end of the seasonality pattern that, to date, has affected our business. Historically, business has usually peaked in March, and then again in October. This year, we have not seen the peak but, at the same time, we have not seen the usual drop in volumes or profitability since March.

Much of Datrontech's traditional business is made up of the sales and distribution of memory products which is an extremely difficult business to predict. Memory prices have collapsed as a result of over production, a situation exacerbated by the chronic economic conditions in South East Asia.

In his explanation of the company's revised figures, Mulford stated that people have been delaying hardware purchases in favour of upgrading software in the face of the millennium.

In my opinion, the jury is still out on the effects of the millennium bug on sales through the channel. From the evidence of run-rate business and buying through the channel, hardware sales revenues have not increased in the way we had expected. However, revenues and unit sales are up on last year.

There are some hardware contracts coming through now. Corporate organisations have been spending money on year 2000 focused consultancy, rewriting code and upgrading software. But this part of the sales cycle is nearing completion and I would predict that we should see strong hardware sales during the next six months.

There is evidence of improving demand - disk drive sales are outstripping supply in some capacities. This is a concern as many of the hard disk drive manufacturers have been trimming back capacity. If there is a surge in demand this autumn, expect to see prices moving north on data storage products in general.

Datrontech had to keep its shareholders informed of what had become a difficult situation. We felt that Datrontech's comment, 'in common with a number of other distributors of PC-related products', referred, among others, to us - it was our responsibility to inform shareholders that we were not experiencing the same decline.

Undeniably, the UK IT distribution market has had a bad time over the past few months. I hope over the next 18 months listed distribution companies will be able to restore confidence in the market.

There are opportunities for fast moving companies such as Ideal and Datrontech.

I remain unconvinced by the broadline distribution model.

Datrontech will come bouncing back. Mulford is a driven man who wants to succeed, so it is unlikely he will throw the towel in without a considerable fight. A battle may be lost, but the war is far from over.