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By | Drew Cullen 19th November 2004 09:50

'Primary vendor' turns screw on Computacenter

Shares down 15 per cent

Computacenter's UK profits are likely to fall by £9m over the next 12 months, following a renegotiation of terms and conditions with its "primary vendor", the reseller warned yesterday. Shares fell 49p, down 15 per cent, to £2.72 on the news yesterday.

The supplier is unnamed but is almost certainly HP, which must keep a tight lid on prices, to compete with arch-rival Dell. At the same time, it needs to start making more money from its PC, server and storage businesses. There is not that much margin in the channel, but it is an obvious place to start looking to make cuts.

Computacenter is Europe's biggest reseller, so the outcome of these annual negotiations shows how much the tier-one product vendors hold the whip hand. Computacenter is not in a strong position to switch-sell: its corporate customers specify the brands and are not going to move to, say, IBM, simply because their dealer is getting nailed on margins.

We assume too, that Computacenter's UK distribution arm, which flogs hardware to smaller resellers, will also be hit by the new contract, although here, there is even less margin to play with.

Computacenter has been building a biggish services arm on the back of its core product supply business. Yesterday's outcome will bolster its determination to ramp up this higher-margin business even more quickly. ®

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