Computacenter chief lashes out at Hewlett-Packard

Mike Norris, the chief executive of Computacenter, launched a withering attack on Hewlett-Packard yesterday, questioning how the computer giant could justify its business plan in an environment where prices of some hardware, such as flat screen monitors, have collapsed 90 per cent in five years.

Mike Norris, the chief executive of Computacenter, launched a withering attack on Hewlett-Packard yesterday, questioning how the computer giant could justify its business plan in an environment where prices of some hardware, such as flat screen monitors, have collapsed 90 per cent in five years.

Computacenter was forced to issue a profits warning in November after HP, one of its main business partners, reduced the commissions it pays the company for reselling its computers to business customers.

Announcing annual sales down £20m to £2.46bn yesterday, Mr Norris said: "If you look at it, what do they [HP] do? What's their job? The software is made by Microsoft, Intel make the processors, that's where the value is. They don't make hard drives. They don't make the memory chips and they don't make the tin [the casing] itself. They certainly don't assemble themselves. What is it that HP do?

"If you ask them, they say brand and quality, a little bit of design. There are two ways out of that. One is to get customer control and sell direct, the other is to try and get costs out and help that way. It's not a great place to be if you are HP. At least with us, we advise, we install. I can say what we do. There's not a lot of value left in the middle, it's difficult to justify a margin."

A spokesman for HP said the company could not comment on Mr Norris's remarks. The lion's share of Computacenter's business is under attack from the rampant deflation in technology hardware. Of its £2.46bn in annual sales, £2bn comes from supplying hardware products. The price of computer servers is falling by 12-15 per cent each year while PCs are falling at a rate of 10-12 per cent.

However, despite the fall in sales, profits at Computacenter were up 3.2 per cent to £67.3m with a final dividend of 5.2p, giving a total dividend for the year up 7.1 per cent.

Mr Norris has managed to maintain profits by moving the business to higher-margin technology services which involve installation, managing IT systems and long-term support contracts.

The company has weathered the worst of the IT recession while rivals have seen more dramatic collapses in their businesses. However, Mr Norris speculated yesterday whether it would have been better to adopt a more radical approach to restructuring the business towards higher-margin service business.

He said: "Computacenter, while it hasn't been a great growth story in the last few years, it hasn't fallen off a cliff. A lot of IT companies bombed out and then recovered. Sometimes I think maybe it would have been better to do that rather than change without taking a bath. We've got to plot these two businesses and see what happens."