ICL Plc, a company not required to reveal interim results as it is 82% owned by Fujitsu Ltd and the remainder held by Northern Telecom Ltd, has been giving an outline of its performance in the six months to June 30. Turnover was up slightly on the same period last year, with profits fairly flat as gross margins fell another three points to around 28%: between 1992 and 1993 they were down six points. ICL has continued to cut costs and hopes to shave UKP100m by year end, the same amount as last year: pruning building needs, shedding a few staff and streamlining the infrastructure. In ICL’s year to December 31 1993, the last published figures, turnover was UKP2,600m and pre-tax profits UKP23.4m, hit hard by rationalisation costs of UKP47.7m. It made a net loss after preference dividends. Turnover this time grew in facilities management, professional services, training, volume products and Unix data centres. In the six months ICL secured major service contracts with British Steel Plc, Gatwick Airport, the Civil Aviation Authority, and the Ministry of Defence. ICL’s participation in the Camelot consortium for the National Lottery is also proving particularly fruitful. UKP26m of revenue has already been made, predominantly from D2D, its manufacturer of the consoles, and further revenues will come from building the network, installing the consoles, training and support – all controlled by ICL. ICL believes that the reduction in gross margins is common to the whole market, part of the increasing move to lower margin client-server and away from premium margins of mainframes.
Aggressive pricing
Customer loyalty has gone out of the window, as buyers shop around for product requiring aggressive pricing and marketing. In the personal computer market ICL will keep the ErgoPro at least 5% cheaper, by price/performance, than Compaq’s DeskPro; the ValuePlus 15% cheaper than Compaq’s Prolinea and 5% cheaper than Dell’s offering; the Ergolite notebooks 10% cheaper than Toshiba, the lap-top leader. ICL is committed to increasing its market share with such aggressive pricing even at the expense of margins and hopes this aggression will put it into the top five manufacturers in the UK within three years, shipping 500,000 units per annum within five years, from an estimated 80,000 this year. Hitting 80,000 units will confirm ICL’s return to growth, after slipping 16.7% between 1992 and 1993, though the market as a whole continued to grow. This the company blames on the move from selling to traditional ICL customers to direct sales through Technology Plc and a failure to offer the right products to the market. The reason for the resurgence: aggressive pricing, advertising, more channel capacity from Technology Plc and Technology offering a wider product range, including non-ICL products. Personal computer unit sales will include those manufactured for Virgin Group since their agreement in September (CI No 2,512). ICL hopes to extend its presence into the retail via this partnership. ICL will be similarly aggressive in the server market – offering TeamServers 5% cheaper than Compaq, and SuperServers between 5% and 20% under rivals Sun Microsystems Inc, Hewlett-Packard Co and IBM Corp. ICL will also spend millions in advertising its brand, exploiting the Fujitsu name and the partnership with Virgin.
