Profit warnings rife among hardware suppliers

Delayed contracts mean many UK hardware makers are suffering financial pain

One in eight UK-based hardware suppliers have issued profit warnings in the last three months, according to Ernst & Young.

Most profit warnings were brought about by contracts being delayed, and the majority were issued by smaller companies, the professional services company said on Monday.

At the same time, one in nine fixed-line telecoms companies have issued profit warnings, brought about by tumbling prices of voice calls and broadband connections.

Ernst & Young's technology director, James Bennet, was pessimistic that the situation would improve.

"While IT spending has picked up across the board in 2006, any wider economic weakness could see budgets curtailed once again," said Bennet.

"We're already seeing signs from the US that technology spending is entering a downturn, and in general, buyers are becoming more price sensitive," Bennet added.

Ernst & Young pointed out that smaller suppliers were more vulnerable to contract delays, as they typically clinch fewer contracts than larger rivals.

The research covered publicly quoted companies, and included 50 hardware suppliers. Those issuing profit warnings were: Cambridge Silicon Radio, Fayrewood, Newport Networks, Psion, Sarantel and Synchronica.

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