Falling margins hit CC revenue
Computacenter's group sales have dropped by 10 per cent and the corporate VAR has warned investors that its 2005 profits will be "substantially" lower than last year as a result.
The firm attributed the revenue shortfall largely to lower product sales and margins, which have led to smaller rebates from its principal vendor, Hewlett-Packard (HP).
HP first slashed rebate levels by one-and-a-half to two per cent late last year, and renegotiated its Ts&Cs with Computacenter (CRN, 29 November 2004). At the time the VAR said the new Ts&Cs were likely to reduce its profitability by a possible £9m.
The company said in a statement last week: "Since the start of the year, Computacenter has experienced difficult trading conditions. Reduced product sales, and an adverse change in mix towards lower margin product, have generated smaller rebates from our major vendor. This has had a material impact on margins in the first quarter." The VAR's financial statement came at a time when many analysts warned of a global slowdown in IT spending.
George Shiffler, principal analyst at Gartner, said: "Overall shipment growth is expected to slow this year. Professional replacement activity peaked in 2004 and will decelerate sharply over 2005."
Separately, distributor InTechnology also issued a trading statement last week. The firm revealed that Q4 maanged services profits met expectations.
Peter Wilkinson will now replace outgoing Charles Cameron as chief executive of InTechnology. Wilkison said: "We were ahead of the market in terms of managed service adoption. Many resellers are now getting involved in services because of dropping margins."