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By | Paul Kunert 23rd October 2015 11:55

Northamber: Windows 10 killed our sales momentum

Plus: Chairman Philips moves to non-exec role amid search for new overlord

It is an end of an era for the tech channel as Northamber chairman David Philips – the godfather of distribution – confirmed he is stepping back from operations and is seeking a new leader of the company.

The colourful veteran confirmed today he is “closing in on the age of 71, so it is clearly time I commence the process to enable my own executive role to be downsized”.

He said he’ll “seek to assume a more non-executive chairman’s role . The search for an executive managing director is already under way.”

Philips founded Northamber in 1980, making it one of the early pioneers of technology distribution, when PCs were sold for thousands of pounds with high double digit margins.

The business peaked in 2001 with revenues nearing £300m but it lost the HP franchise – the first of many vendor franchises lost in recent years – and has struggled to reach those highs ever since.

Alexander Philips, the son of David, joined the business almost two years ago as strategy director and is likely the next-but-one-boss in waiting.

The pending role change for chairman Philips came as the company became the latest tech supplier to blame a comparative slowdown in sales on Microsoft’s roll out of Windows 10 and the disruption to PC demand either side of that launch.

The AIM-listed veteran Surrey-based distie reported a revenue climb of 4.1 per cent year-on-year to £65.4m for fiscal’ 15 ended 30 June, which pointed to a cooling of sales in the second half.

Revenue at the half-way stage in the six months ended December came in at £35.7m, up 18 per cent on the prior year period, and were heralded at the time by chairman David Philips as evidence of Northamber’s turnaround.

The year-on-year comparison for H2 was less flattering, as revenues fell 8.8 per cent to £29.75m. The financial year proved to be “one of contrasting fortunes”, said the distribution old timer.

He said that after Microsoft’s removal of support for XP and the criticisms of Windows 8, “the resultant uncertainty created within the commercial user sector, running business critical legacy software and peripheral devices, was such that a strong hiatus was created in the otherwise normal anticipated demand run-rates.”

Philips pointed out the “effect” was highlighted in HP’s Q3 results, in which the company criticised the way Microsoft offered a free upgrade to Windows 7 and Windows 8 users, and the late release of the code to OEMs.

Huge inventory overhead across the entire distribution channel also led to a diminished stock holding of PCs that came pre-installed with Windows 10, in both the week before and after launch.

The “hiatus continued” following the launch of the OS, when “inevitable press reports of discovered aspects or problems and awaited ‘fixes’” started to emerge, the distie said.

That Northamber’s sales remain heavily affected by the PC market indicates there is some way to go in efforts in recent years to exit “empty calorie” product streams shows.

The company is trying to build “solutions” that offer higher profits, “the ‘softer’ type of product… which has a greater level of application complexity and which require a greater level of expertise to operate and install”, said Philips.

The chairman said the “transition” can “only be at an evolutionary pace” that suits the demands of trade customers.

Northamber reported relatively flat costs but the rise in sales for the full fiscal led to an improvement in operating losses from £1.22m to £932k. After bank interest and tax were accounted for, the net loss was £888k versus £1.15m from a year ago. ®

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