Tag: Datatec

Datatec issues profit warning

Fire Bell

Datatec issued a profit warning this morning as its for-sale distribution arm, Westcon, has been hit hard by an SAP roll out.

The outfit warned in April that earnings per share for its fiscal 2017 would more than halve, but no one was ready for the number to be 66 percent behind the previous year.

Datatec laid the blame firmly at the door of its distribution arm Westcon, or Westcon-Comstor as it has taken to calling it since it began negotiations to sell it.

Ill effects of the SAP roll out had devalued the business in the eyes of suitors, at least in the short term.

Westcon-Comstor’s global sales fell by seven percent to $4.53 billion, the damage mostly done in EMEA, where sales plunged by $263 million to $864 million, a whopping 30 percent slump.

Datatec stated: “Europe went live on SAP during November 2016, resulting in transitional challenges and delayed financial reporting, exacerbated by the business process outsourcing in that region. Trading conditions in MEA were weak, resulting in a poor performance across the region, with additional receivables write-offs in Africa and the Middle East.”

Datatec’s other main arm, integrator Logicalis, performed in line with expectations for the year, Datatec added.

Datatec gave no update on the possible sale involving Westcon-Comstor, other than to repeat that there can be no certainty that the transaction it is negotiating will be completed.

Westcon-Comstor expected to be sold

ForSaleThe dark satanic rumour mill has manufactured a hell on earth yarn claiming that Westcon-Comstor is about to be sold off.

Datatec, the parent company of WestconGroup and Logicalis, has confirmed that it is in the process of negotiating “a material transaction” and the rumour is that its $4.9 billion distributor is going to be flogged off.

Datatec has told the regulators that the “material transaction” could have a material effect on the $6.5 billion company’s stock price if it is successfully completed.

Westcon-Comstor has not been doing that well over recent quarters. Westcon’s revenue fell 10 percent in the most recent filing period to $2.26 billion, with sales dropping everywhere except Asia-Pacific. The rumour is that it makes sense to off-load it, however no one is confirming anything. .

One of the reasons for the company’s woes is that its Latin America was sucking it dry and it was costing a fortune to transform the company’s business process outsourcing (BPO) practice.

Datatec spent $160 million in June 1998 to buy a 92.5 percent stake in WestconGroup and quickly expanded into Europe, which now accounts for 34 percent of the distributor’s overall sales.