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RM declares war on BBC, issues profit warning

Schools spend on broadband

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RM, Britain's biggest IT supplier to schools, today expressed concern at the threat presented by BBC's Digital Curriculum proposals to the UK educational IT industry.

In a profits warning today, the company said it would spend whatever it takes to support joint action with "other industry partners to defend choice, innovation and diversity in the digital learning resources market".

In other words, The state-funded BBC is muscling into an already crowded market, and RM does not like it. But this is a threat for the future; the present is also problematic for the company, which today warned that sales will be 15 per cent lower and profits 50 per cent less this year than in 2001. This is against a backdrop of an anticipated increase of nine per cent in total educational IT expenditure in 2002.

RM bases its sales forecast on trading in its first quarter, soundings taken at last month's BETT (the key UK trade show for IT in education)and recent market research.

It says that sales in December and January were down considerably on the same months in the previous financial year. And it attributes this to three reasons:

1. Schools are spending more of their IT budgets on broadband access, leaving a smaller slice of the cake for the software, PC and maintenance services supplied by RM. And changes in the way that the Government is funding schools is making it more difficult for RM to calculate how much sales will come its way.

2. The PC market remains difficult, and RM says it will be hard to maintain traditional market share (it used to be the dominant PC supplier in British schools). Rapidly declining margins for notebook PCs is making the hardware business even tougher.

3. Two software products are late. One, RM Community Connect 3, is described as "a major strategic upgrade for our customers and will generate a large amount of additional business for RM's other product ranges". The company now expects to ship this in May. It is the software business where it fears the potential impact of the BBC. ®

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