Market comment
Dimension Data Holdings plc
Trading Update
As noted at the time of the interim results announcement in May 2001
Dimension Data entered the second half of the financial year with a healthy
sales pipeline but was nevertheless cautious about market adoption rates.
Since then product trading conditions in certain markets have deteriorated
and it now appears that infrastructure rollouts and upgrades in these
markets are being delayed. Despite the challenging trading environment we
remain encouraged by the interest in and uptake of our GSOA services and our
continuing ability to differentiate our managed services offerings relative
to those of our competitors.
In such an environment we have seen increased price competition for product
sales. This is impacting on our margins particularly in those regions where
Dimension Data's business is still predominantly product-led, most notably
the US, UK and Germany. As a result, we expect discounting by certain
competitors and manufacturers to negatively impact overall achievable margin
in the second half of the current financial year. It is becoming apparent
that the overall impact of product pricing pressures and the integration of
Proxicom is expected to lead to the full FY2001 operating margin being
around 1 to 2 percentage points below the level reported at the interim
period.
In response to current challenging market conditions, Dimension Data
believes that it needs to accelerate the transition to its services-led
business model. Accordingly it has hastened investment in the areas of
services and engineering expertise and is reducing dependence on product-led
sales. The closing of the Proxicom acquisition is a key element of this
strategy. The Group is in the process of integrating the operations of
Proxicom with its existing operations and this will enhance the Group's
competitive positioning by adding new competencies to its overall
integration and connectivity service offering.
Dimension Data's differentiated offerings and the ability of recently
acquired companies to access a significantly larger customer base means that
the Group is winning substantial services-led business, the financial impact
of which will materialise in the FY2002 year. In light of its offerings the
directors are confident that Dimension Data will continue to increase market
share in these conditions and are optimistic about Dimension Data's
competitive positioning and ability to enhance margins, particularly when
trading conditions become more favourable.
Contacts:
Dimension Data Holdings plc
Malcolm Rutherford +27 11 709 1008
Karen Cramer +44 207 659 1600
Jeremy Ord +27 11 709 1009
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