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Systemax profits halve in Q4

Paul Kunert

Systemax fourth quarter profits have more than halved in the downturn as gross margins were pulled down by aggressive pricing strategies and reductions in freight charges that were designed to stimulate demand and grab share from rivals.

The US parent of Misco, saw net income for the last three months of 2008 plummet 58.3% to $10m (£7.1m) year-on-year but efforts to drive demand saw revenues increase 6% to $812.7m (£579m) including the for ex-translations.

The “challenging economic climate” said Richard Leeds, Systemax CEO, “significantly impacted spending on information technology and industrial products both in the business to business and consumer markets”.

Technology product sales in North America grew 18% to $540.7m but revenues in Europe fell 14% to $216.9m, including the impact of exchange rates.

Gross margin of 14% was down on the 15.5% a year ago and this was due “freight and margin concessions” to win new business and grow market share said Gilbert Fiorentino, Systemax chief executive of the Technology Products business.

“While this had a short-term impact on gross margins, we believe it will position us very well with a larger customer base when consumer spending returns,” he said.

The technology seller has also made aggressive investments in its retail business, as well as web and technology infrastructure and continued to roll out its Retail 2.0 initiative allowing customers to test products and compare prices in-store.

For the year, Systemax sales grew 9% to $3bn year-on-year and profits fell 24% to $69.5m.

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