Thursday, 27 August 2009

Computacenter winning UK services share

(By Anthony Miller – Thursday 27th August 2009 8:45am). There’s a stark contrast between the fortunes of Computacenter, which reported its 1H09 results this morning, and Fujitsu Services, which stunned the market with news of substantial layoffs yesterday (see Fujitsu announces major UK redundancy programme). Whereas Fujitsu’s UK business, primarily infrastructure support services, is suffering a 7% revenue decline, Computacenter’s UK services business, also primarily infrastructure support, grew 8%. There’s a difference in scale, of course. Fujitsu’s UK revenues were around £2b last year (to 31st March ’09), over 80% in services. Computacenter UK turned over £1.4b last year (to 31st Dec. ’08) of which 23% was services. That should have worked in Fujitsu’s favour, but clearly Computacenter is winning share.

Both companies are facing the same market conditions. As Computacenter CEO, Mike Norris, put it, “... we have seen a significant consequent reduction in our customers’ operating budgets. This is no surprise and we expect this to continue for the foreseeable future.” I suspect this is not just the ‘more for less’ syndrome in full play (i.e. pricing pressure) – it may well be that even ‘keep the lights on’ operations are being dimmed. I would also imagine Fujitsu has a higher exposure to project-related services, such as infrastructure implementation and integration, which typically comes on the back of new hardware roll-outs. Norris noted just this effect at Computacenter: “Customers’ expenditure on professional (i.e. project) services declined as customers put non-critical project expenditure on hold.”

I can only deduce that the difference must be in execution. Computacenter’s UK services, under the command of Digica ex-CEO, Mark Howling, seems to have responded quicker to the downturn (Computacenter has already pretty much done its restructuring) and seems to be nimbler at picking up the business that’s still out in the market. Indeed, Computacenter’s UK first-half (adjusted) operating margins (incl. h/w) rose 70bps yoy to 2.0%. With the wafer-thin margins at play in low-level services businesses, it really does pay to keep ahead of the game.

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