Network computers really can make a positive difference to the bottom line if HDS Network Systems Inc’s experience is anything to go by. The King of Prussia, Pennsylvania company was fast out the blocks with its X terminal-derived machine and it seems to have paid off for now. As anticipated earlier this week, the company reported second quarter net profits up 53% to $543,979, or seven cents a share, on revenues that were up 52% at $8.9m. The company said sales of its @workStation network computer only really kicked in during the December quarter, and around a quarter of its revenues came from one sale of 1,000 network computers, software and servers to the American Association of Retired Persons. The company’s claim is borne out by its first quarter earnings of just two cents a share from revenues of $3.5m. Comparing the second quarter year- on-year, both research and development and sales and marketing expenses more than doubled, but R&D still only came to 4.3% of revenues this time round. Gross margins were 28% in the quarter just gone, compared to 24% a year ago, reflecting the higher margins with NCs as opposed to the old terminals. But the company is well aware that a quarter is a very long time in the internet business and warns that margins will vary from quarter to quarter depending on the hardware/software mix. And it remains to be seen whether this kind of growth can be maintained by HDS.
