Computacenter profits warning shocks City

IT equipment and services group Computacenter shocked city investors on Wednesday by issuing a profits warning and warning of a slump in revenue.

The company's share price dropped nearly 10 per cent to 262p in trading in London after it was revealed that sales have slumped 10 per cent so far this year, compared to the same period in 2004.

Computacenter did indicate that the situation appeared to be improving, but cautioned that unless market conditions improved, profits for this year would be "substantially below last year".

The shortfall in sales appeared to relate to products, rather than services – Computacenter stated that service revenues were generally up this year compared to last. Chief executive Mike Norris indicated that the company has sold less high-end equipment, such as servers, and more lower-margin kit, such as laptops and PCs.

Faced with a fiercely competitive market for IT equipment, Computacenter has been attempting to grow its IT services arm. Analysts believe it must renew its efforts.

"Computacenter is currently placed third in our ranking of support services suppliers. If it is to stand a chance of catching IBM (number two) and HP (number one), it's got some pretty intense work to do," said Ovum analyst Kate Hanaghan.

"More widely, this news further demonstrates that corporate IT is without doubt an incredibly difficult place to be. The margins just keep getting tighter and the customers just keep on yelling 'more for less'," Hanaghan added.

Last month, Norris launched a blistering attack on HP, claiming its business model was flawed. This came after HP had cut the amount of commission it paid Computacenter for selling its equipment.

Graeme Wearden writes for ZDNet UK.