CC prepares City for UK profit reduction
Corporate VAR cites HP rebate cuts, but market watchers are sceptical
Hewlett-Packard's (HP's) recent cut in rebates for the channel has forced Computacenter to issue a statement to the city claiming its profitability in the UK could be reduced by about £9m.
In a statement, the corporate VAR said it has "concluded annual negotiations with its primary vendor" and that, due to "new terms and conditions between the two firms", Computacenter's profitability is likely to be reduced.
HP cut reseller rebates by between one-and-a-half and two per cent this month, but Computacenter rivals thought it unlikely this would account for the whole £9m reduction of profits.
Steven Rigby, general manager at SCC Europe, said: "We do not believe there is a material change in our Ts&Cs to that level. We're seeing market growth to compensate for any changes in contracts for HP."
The managing director of one of Europe's largest resellers asked: "Is HP putting Computacenter under pressure and bringing it down to a level playing field?"
Asked whether the cut in rebates marked the end of Computacenter's alleged favourable contract terms with HP, Mike Norris, chief executive of Computacenter, said: "It does not mean that will end. HP remains our primary vendor and we remain its primary reseller."
He declined to explain how a new HP contract could cost the firm £9m. HP also declined to comment, and said that all business reviews are entirely confidential.
But Philip Garnar, director at channel consultancy The Lamberhurst Corporation, said: "Computacenter has forecast a large profit drop for what is a very small percentage difference in rebate.
"It makes one wonder whether they were not on the same playing field and have lost part of that special arrangement."
Channel executives said generous rebates on Intel servers became untenable after Dell made cut-price offers for enterprise customers. HP had to make resellers tighten their belts so they could compete with the direct vendor.
Derek Lloyd, managing director of PC World Business, agreed resellers have to "tighten up and sharpen up" because Intel servers are becoming commodities, under pressure from Dell.