Y2K still ripples through the market

Y2K may no longer be an issue that bothers IT directors very much, but the reverberations continue to be felt in the City where...

Y2K may no longer be an issue that bothers IT directors very much, but the reverberations continue to be felt in the City where the performance of quoted companies continues to be affected.

Ian Mitchell

City Briefing

The latest victim of the fall-out is Computacenter, which provides products and support for corporate networks and desktops. It issued a profit warning last week and saw its shares fall 35% as a result.

The supplier stated that, while profits were in line with expectations in the first quarter, there was a shortfall relative to budget in the second quarter and it anticipated the delayed recovery will affect the third quarter, albeit to a lesser extent.

Computacenter partly blamed its problems on the fact that customers are re-evaluating what they want their corporate systems to be able to do to cope with e-commerce. This seems to be a common thread in the delayed pick-up for many IT suppliers post-2000.

In the third quarter of last year many IT users halted projects they were planning to implement until after the millennium, telling their suppliers that the projects were merely delayed, not cancelled. It has now become clear that users have changed their stance as a result of the explosion of activity in business-to-business e-commerce and its implications for their internal systems.

For example, increasing numbers of companies are looking to install customer relationship and supply chain management systems. This means that platforms, applications and databases have to be accessible to those with a legitimate interest in the information they contain, yet secure enough to keep out those not authorised to access them.

In addition, IT managers have to ensure that the systems they roll out are future-proof enough to be able to cope with whatever unexpected shifts come about as e-commerce matures. As a result of all this, it is understandable that users want to look again at the projects they froze nine months ago and consider whether they are still the best way forward.

This seems the most likely explanation for the later-than-expected pick-up in projects after y2k. There may yet be a further delay as the start of the summer holidays is never a good time to begin a project. So a serious rise in project work won't start until September.

The outlook for Computacenter is more rosy, with Windows 2000 implementations due to begin shortly - it recently won a 35,000-seat roll-out for one of its largest corporate customers - and accelerate throughout the rest of this year.

Computacenter is also getting into Web and application hosting, which further increases the range of services it offers, not to mention the ongoing bid for Compel, which, if successful, will bring Computacenter greater scale and higher margins in the managed desktop arena.

Ian Mitchell is an ITanalyst with stockbroker Beeson Gregory. His opinions should not be construed as investment advice.

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