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Morse detects no seasonal upturn

Profitable but downbeat

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Morse, Europe's biggest Sun reseller, had a very tough quarter ended September 31, with sales plummeting to £111m(2000 £151m).

So-called infrastructure business - which most people would recognise as Unix boxes and networking kit - was £88m in the Q (2000: £133m). Service sales - the Great White Hope of all corporate resellers - were up though, at £23m (2000: £18m).

But the company's cash position shows that it runs a very tight ship; against a background of falling sales, the group still produced net cash of £10m and ended the quarter(its first of the financial year) with total net cash of £52m (30 June 2001: £42m).

Unix servers for sale

So why the huge fall in infrastructure sales in UK and France, its two biggest markets? Usually, the company gets a sales kicker in the UK at the end of the summer, feeding its way in to higher sales in September, and a strong order book for Q2. This didn't happen this year and there is no "solid evidence that one will occur in the current uncertain climate", the company says.

In France, it's even worse with a "marked deterioration in the infrastructure business since the year end with sales lower than normal during the summer and no pick-up in September".

Germany is tough but trading in line with expectations, and new subsidiary Spain is also performing in line with expectations. But these are much smaller businesses.

Morse says it is difficult to work out how much September 11, as opposed to the general economic malaise, has had on sales in what is, after all, a European company. But it notes that many financial service customers were impacted by the terrorist atrocity and have postponed European contracts to deal with more pressing priorities in the States.

Morse says it will continue to cut costs in line with expenses - but not at the price of damaging the fabric of the business. Not up for discussion is geographic coverage. With an ability to generate good cash even when times are tough, Morse is in a good position to buy more weaker resellers abroad and bolster its service business through acquisition. ®

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