UPDATE: Computacenter 1Q Revenue +8%, Strong Rebound In Products

Computacenter PLC (CCC.LN) said Friday that trading during the first quarter of 2010 was in line with expectations after a strong rebound in product revenue.

Revenue for the three months to end-March rose 8% to GBP616 million, lifted by a solid performance in product revenue which was up 9%. Services revenue, which historically has higher margins, increased only 2% over the period.

Computacenter, which provides IT infrastructure services and hardware, said its balance sheet continues to strengthen, and there has been no material change in its position since the end of the first quarter. It had GBP89 million in net cash at quarter-end.

The company also confirmed trading at its German business has improved, with the momentum continuing into the second quarter. The German business accounts for 37% of total group revenue.

"There is something of a catch-up going on in spending on hardware following very depressed levels of investment over the last 12-18 months," said Ian Spence, analyst at IS Research.

Spence added that Computacenter's peers Dimension Data Holdings PLC (DDT.LN) and Datatec Ltd (DTC.LN) both reported firmer year-on-year numbers for their hardware sales earlier this week, indicating better consumer sentiment.

"Whilst this is clearly good news for this peer group, it seems unlikely that product revenues will continue to enjoy double digit growth over the medium-term whilst growth prospects continue to look promising for managed services," Spence said.

Panmure Gordon analyst George O'Connor said the upswing in product sales was helped by the release of new operating systems during the period, including Microsoft Corp.'s (MSFT) Windows 7 at the end of 2009.

"Computacenter's strong product sales very pleasing and a sign that market conditions are improving, however it's too early to expect big upgrades just yet," O'Connor said, adding market uncertainty with the U.K. emergency budget and the debt crisis in the Euro zone could still shake investor confidence.

At 0849 GMT, Computacenter shares were up 1.7 pence, or 0.5%, at 335.5 pence, valuing the company at GBP514 million and outperforming London's FTSE 250 Midcap Index, which was down 0.973%.

Company Web site: www.computacenter.com

-By Elliott Ball, Dow Jones Newswires; 44-20-7842-9314; elliott.ball@dowjones.com

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