Pan-European integrator Morse has admitted its infrastructure business is flagging after revealing flat turnover in its third quarter trading update.
The firm, which acquired SAP reseller Diagonal last year for £50m (CRN, 29 August) posted turnover of £96m for the quarter ended 31 March, exactly the same as a year ago. Diagonal contributed £13m to the total.
In a trading statement the firm said: "The trading environment for infrastructure in the UK has been tough for some time. There has been a further deterioration, with both sales and margins under greater pressure."
Morse also revealed that services will play an "increasingly important role in the business".
Duncan McIntyre, chief executive of Morse, said in a statement: "We were disappointed in the performance of the UK infrastructure business, with the market proving weaker than anticipated. We will take advantage of these market changes to remodel our infrastructure business so that it forms a productive part of the services-led business we are developing."
Alastair Edwards, senior analyst at Canalys, said Morse should continue down the services path.
"Its infrastructure business has seen hard times over the past few months as the hardware market becomes more commoditised. The restructure has been dramatic, moving towards services. Two years ago 70 per cent of the business was hardware-based. Now it is nearer 60 per cent," he said.
Edwards added the firm will probably continue expanding in Europe, buying services-oriented companies which will "further dilute its infrastructure offering".
Kate Hanaghan, research analyst at Ovum, said: "Morse is under considerable pressure to turn in real results."
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