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Computacenter ditches PC distribution

Strategic review leads to 'structural changes'

Computacenter has finished a strategic review which means it is pulling out of trade distribution of PCs and printers to focus on servers and storage products.

At the start of last year Computacenter Distribution hired Phil King from SCH in order to increase revenues from virtualisation and business continuity.

The move is likely to cut revenues for 2009 by £70m, but should not have any impact on profits.

But the company warned that although it was pleased with results of the changes made in 2008: "We will be implementing structural changes in our UK operations, aimed at significantly improving our effectiveness and competitive position. These changes will result in fewer layers of management... and have the not inconsiderable subsidiary benefit of reducing our ongoing expense base by more than £15m per annum, by the end of 2009." Which sounds like job cuts to us.

Computacenter will spend £25m over the next three years on a new internal ERP system.

The firm issued a profit warning in October, but now reckons things are not as bad as it first feared. It expects UK sales to be £1.39bn, up 2.5 per cent and to see group adjusted profit before tax for 2008 to be materially ahead of market expectations of £38.1m. Earnings per share will be substantially ahead of expectations thanks to better profits, less shares in issue and a lower tax bill.

Service business in Germany performed well. Total German revenues were €1.05bn, up one per cent or 18 per cent in Sterling terms.

Computacenter France also did better but remains a problem child - the statement said: "We are concerned that we have not made the strategic change needed to deliver a long term, acceptable level of profit and much remains to be done."

Computacenter said in October that the bankruptcy of a major financial client was going to cost it £1.2m - this has now been cut to £850,000, and a provision held for a property should more than cover that debt.

Computacenter's statement said there was room for optimism:

While Computacenter is not immune from a major reduction in capital expenditure amongst its clients, we are encouraged by the performance of the Company in the last three quarters, particularly the success of our service offerings, which is continuing to see major growth.

While we are pleased with performance in these uncertain and challenging times we are not satisfied, and that is why we have chosen to focus on making the investments and changes in our systems, organisation and use of capital necessary to make us more competitive. The combination of current performance and these enhancements to the Company, gives us cause for optimism for 2009 and beyond.

The firm is updating City analysts this morning, but we're hoping to get some more details this afternoon.

Full statement here.

A Computacenter spokeswoman told us: "We will be working with SAP on the ERP project - they already supply us in Germany so it makes sense to standardise across the group. We are looking at our costs - it would be foolish not to be at the moment but it is too soon to make specific projections in terms of jobs. In some areas like managed services we are still recruiting so it's not all bad news."®

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