Elcom Net shift blamed for loss

Elcom International's transition to an internet-based reseller continued to take its toll as a net loss and falling sales prevailed over the first quarter.

In the period ended 31 March, Elcom saw a net loss of $1.5 million, against a net profit of $1.4 million in the first quarter last year. Sales were at $174 million, declining by 8.3 per cent from $190 million last time.

Countering the shortfall, Elcom managed to steadily reduce inventories in the three-month period from about $40 million as at 31 December 1998 to $24 million by the end of the quarter. Inventory was as much as $60 million up to 31 December 1997.

Commenting on the results, Robert Crowell, chief executive of Elcom, said the losses were 'basically in line with expectations' as the reseller continued its transition to a predominantly internet-based structure.

But despite the stated effects of restructuring, no related charges were declared in the quarter.

The Elcom Systems unit was integrated into the elcom.com subsidiary set up at the end of last year, into which the reseller intended to move its PC business to lower costs.

Elcom abandoned earlier plans to spin off its e-commerce arm as a separate company and absorbed it back into the main business, Elcom Services, as part of a $12 million restructuring programme (PC Dealer, 14 October 1998).

The about turn was blamed on market conditions and the merger resulted in 24 staff being made redundant from its UK operation.