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Falling prices boost Computacenter profits

The cheaper the hardware, the greater the demand, the more services it flogs to its blue chip customers

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Computacenter posted pre-tax profit up 30 per cent for the first half of the year, with the reseller giant saying it welcomed the current industry curse of tumbling hardware prices. The company posted pre-tax profit at £40.7 million and turnover up 16.6 per cent at £904.8 million for the six months ended 30 June. This was against £31.3 million and £775 million respectively for the previous year. Earnings per share jumped 28.1 per cent to 14.6 pence. Computacenter said overall sales growth was down on last year. This was due to falling growth in hardware sales as prices continued to fall and businesses were gripped by uncertainty over Y2k. However, the company said it welcomed the long-term drop in hardware prices as it upped overall hardware sales which leads to increased demand for services. Ina prepared statement, the company said: "In line with our long term strategy, the group has continued to invest heavily in expanding its service operations resulting in accelerated growth in this area of our business in the first half." The company did not detail services growth in the period. But analyst Richard Holway estimated services revenues increased by around 40 per cent (using the criteria of total sales less costs of goods for resale). According to Holway's calculations: "If Computacenter made not a jot of margin on its hardware or other 'goods for resale' then services revenues increased from £140 million to £198 million in the six months." The group also said staff levels had grown by 17.5 per cent this year to 5384. Computacenter's businesses in Europe also performed well. Turnover in France was up 54.3 per cent on last year at FF1,061 million. In Germany sales grew by 146.7 per cent to DM94.4 million for the subsidiary bought two years ago. ®

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