Integrator Data#3 has reported a decrease in year-on-year sales, which it said would significantly affect its full-year profits.
In February, Data#3 announced a first-half EBIT of $1,054,000, down 27 per cent on the previous year, at a time when the integrator was hopeful of a pick-up in the second half.
John Grant, Data#3's managing director, said "the pick-up we were looking for after Y2K has not emerged, and it seems to have been superseded by a GST-induced slowdown. We cannot presently see our second half being any better than our first half".
In a statement relating to the announcement last week, Data#3 also quoted figures from IDC which reported a drop in corporate PC shipments and servers in the March quarter, which was predicted to continue into the June quarter, due to a residual Y2K effect and a looming "GST freeze". The integrator also quoted analyst IDC's prediction that the underlying demand for PCs had not fallen off, and sales are expected to improve "substantially" after July 1.
Grant said these current market conditions exacerbated the company's situation, as the planned investment on integration of its recent acquisitions of CICtechnology and Beethoven Computer Systems could not be deferred.
"If this [slowdown] was forecast as a permanent shift in market conditions we would need to take a different tack, but as it isn't we believe we need to look after our shareholders' interests in the mid term," Grant said. "This means sticking to our national development strategy and growing the skills we have in our services business. These are the keys to long-term sustainable profits." According to Grant, Data#3's services business has maintained a strong performance. "The fact is that a lot of services offerings, for an integrator, get generated through the integration of products via services." However, he said Data#3's independent services offerings were "increasing year-on-year".
Grant said in addition to changes in its back-end processing systems, to achieve greater operating efficiencies, it was also making a number of changes to the structure of the business. "The point is to position us better to be successful in the market in which we're operating, we've made some internal changes," he said.
He said Data#3 was "remapping" the direction the business needed to take, and "the strategies that needed to be put in place in order for those directions to take effect".
Grant added that it was "only situations like this that make businesses stronger.
"You challenge the very fundamentals of your business, those which have made you successful. You challenge those and you start to introduce real change into your business," Grant said. "And that's an important capability for successful businesses."