By Tony Cripps
Comdisco Inc’s claim that the quarter to September 30, was its best ever may have seen share prices leap 10% in the initial flurry of excitement, but the figures quoted only tell half the story.
The Rosemont, Illinois based equipment leasing and IT services company said that net profit on normal operations grew 19% to $44m in the quarter, with earnings per share apparently growing 17% to $0.27. However, unadjusted figures show that net profit actually fell 25% to $30m in the quarter, with earnings per share down 24% at $0.19, some way behind First Call analyst projections of $0.26.
The difference is caused by the exclusion of a $22m loss incurred during the period by Comdisco’s Prism Communications subsidiary, which it acquired in March. Comdisco is confident, though, that business from the New York-based high-speed data network service provide is on the up. Comdisco says it has already won state approval for Prism as a telecoms service provider for a number of US states. It has also signed interconnection agreements with Ameritech for Minnesota, Ohio, Wisconsin and Illinois and Bell Atlantic for New York, New Jersey and Massachusetts. There is also a deal, again with Bell Atlantic, for expansion of Prism’s Red brand digital service to a number of cities in New Jersey.
While profits may have taken a hit, Comdisco’s sales growth looks better, especially in its increasingly emphasized technology services business. Revenue grew 9% for the quarter to $984m and 28% for the year to $4,159m, or 13% if the $485m sale of its mainframe portfolio is excluded. Comdisco’s technology services, which takes in its business continuity, managed network and desktop management services, showed the most rapid expansion (although admittedly from a fairly small base) increasing 30% in the quarter to $146m and 21% for the year to $522m. However, in real terms (again, after excluding funds from the mainframe business sale) this has only taken technology services from 13% to 14% of the company’s total revenues. Comdisco clearly still faces a big challenge to grow this portion of revenue in proportional terms.
Leasing remains the heart of Comdisco’s business, despite the sale of its mainframe operation in favor of more profitable lines including PCs, network and open systems, midrange, storage and specialized scientific equipment. However, leasing is currently the slowest growing area of its business, increasing 9% in the quarter to $2.65bn. Meanwhile product and other sales totaled $497m, an overall increase of 32%, further demonstrating the company’s active move away from its leasing heritage. No geographical breakdown of revenues was given.
