Jeremy Warner's Outlook: From the company that brought us Freeserve now comes the TechGuys, a great little idea

Stock markets come bouncing back; Genting makes move in casinos play-off
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The Independent Online

Most of us are familiar enough with the problem. Off we go to PC World, filled with hope and anticipation for the spanking new wireless network we are about to install in the house. No more arguments about who uses the internet, no more wrestling with the telephone cables, no more technological Armageddon.

Just plug it in and go, smiles the sales assistant. Follow the instructions. It's easy. At last peace can be restored. Everyone happily tapping away at their computers in their rooms. No more rows. Tranquillity and harmony all round.

Three days later, and in a state of nervous exhaustion, with goodness knows how much spent calling premium-service helplines, you are still struggling with the equipment. Sometimes it works, more often it doesn't and there is no apparent explanation. In the meantime, your daughter has managed to riddle her laptop with viruses and she's lost all her course work in the ether. You may be a technophobe, but it was surely meant to be easier than this.

Salvation is at last at hand. Just call "the TechGuys". This is a great little business idea from the very same people who in all likelihood sold you the wretched equipment in the first place, DSG International, owners of Dixons and PC World. DSG plans to spend £50m over three to four years expanding its existing "PC Service Clinic", which it offers through branches of PC World, into a wider pop-in and call-out chain with branches at handy locations throughout the country.

Such services already exist, of course, but as things stand they are little more than a cottage industry dominated by sole traders of sometimes dubious expertise and honesty. The whole field has become a bit like the building trade. There is a desperate need for a trusted brand in this fast growing market. If the prices proposed by the TechGuys sound steep, at least you know they are standardised.

The idea is not exactly original. On the face of it, the TechGuys is just a straight rip-off of the Geek Squad service offered by Best Buy in the US. But in business, there is nothing wrong with copying a concept from one market to another.

The TechGuys is not going to be another Freeserve for DSG, the internet service provider which transformed the British internet market in the late 1990s, but it does demonstrate that here is a company that continues to think on its feet and innovate in a fast-changing retail environment where services are becoming as important as selling the product. Dixons was slow into the retail market for mobile phones, allowing Charles Dunstone's Carphone Warehouse to steal a march. The chief executive, John Clare, is not about to make the same mistake with computer servicing.

Stock markets come bouncing back

The old stock market adage of "sell in May and go away, buy again St Leger's Day" hasn't served investors terribly well this year. The sell in May bit was sound enough; for a few weeks in mid-May the stock market went into freefall, and the City was abuzz with talk of a crash. But if you have been waiting for St Leger's Day - the famous race meeting is this Saturday - to buy back in again, you'll have gained virtually nothing. Since the May correction, the market has already largely uncorrected. The FTSE 100 continued to surge ahead yesterday, and is now back to within a whisker of the 6,000 mark.

If anything, economic circumstances have worsened since the May correction, with a steep slowdown in the US housing market now well established. Nobody yet knows what that's going to do to US consumption, but the working assumption has to be that it cannot be good. So how come the stock market has rebounded so strongly? At the risk of sounding fatuous, it is because investors are more optimistic now about the outlook than they were back then.

The American slowdown is an inevitable consequence of two years of monetary tightening, during which the Fed funds rate rose from 1 per cent to 5.25 per cent. The real surprise was that it took the markets so long to get the heebie jeebies. There was bound to be a fit of nerves at some point. This was compounded by a sudden unwinding of a number of international carry trades, where investors borrow cheaply in one territory to lend more expensively in another. With interest rates on the march upwards throughout the developed world, many of these trades became untenable.

All these concerns now seem to have been put out of mind, if not entirely forgotten. The carry trades are back, and so, apparently, is the appetite for risk among investors. As for the world economy, a softish landing is now widely anticipated. It would be daft entirely to discount a US recession, but the prevailing view is that of a sharp slowdown, not a full-scale economic retreat, at least for the next year or two.

The May correction is now seen as more of a mid-cycle wobble than a harbinger of anything more serious. Yet it would not be entirely wise to rely on this reassuring analysis. Point number one is that with relatively high inflation, there is little if any scope for a monetary easing in the US should the housing market decide to fall off a cliff.

Point number two is that the geo-political situation continues to look exceptionally fragile. The resilience of the world economy thus far to everything that can be thrown at it, with sky-high oil prices and the persistence of some unprecedented trade and capital imbalances, remains a wonder to behold. The point at which the unsustainable becomes unsustained must surely be near.

Yet there is no evidence of the markets wanting to disrupt the present, extraordinarily benign, economic environment. More bad news from the US housing market will create another wobble in October, the traditional month for stock market corrections. The October mini-crash has become a self-fulfilling event. Because traders anticipate it, it happens. But so too is the pre-Christmas rally, and I'd be amazed if the stock market doesn't end the year comfortably up on the beginning.

Genting makes move in casinos play-off

Genting, the Malaysian-based conglomerate which has long been eying the UK casinos market, is beginning to reveal its hand. Yesterday it made a formal approach to Stanley Leisure, the UK gaming company in which it already holds a 20 per cent stake. If Rank was thinking of doing the same, this was the equivalent of "leave off, this baby's ours".

But what are the Malaysians going to do with their 30 per cent holding in London Clubs International? The intention had been to crunch the two UK casino companies together and then use them as the basis for Genting's wider ambitions in fast deregulating UK and European gaming markets.

That endeavour was dealt a blow last week, when Harrah's Entertainment of the US made an agreed £280m bid for London Clubs. The price was high but the stock market is already betting on higher still. I wouldn't count on it. Genting is seething with rage at the upset in its plans, and at this stage has no intention of selling out to Harrah's. If necessary it will stay in as a minority.

Alternatively, it might bid for London Clubs alongside Stanley Leisure. Genting's chairman, Tan Sri Lim Kok Thay, bought both his stakes at much lower prices than rule today. He can afford to bid more and still in effect pay less than Harrah's. He spotted the opportunity long before Harrah's, and is indignant about the sudden emergence of another big hitter at the tables.

Has he got an ace up his sleeve, or is he just bluffing, more a case of busted than royal flush? Might Rank be persuaded to enter the fray? And what of the newly liberated Ladbrokes, whose chief executive, Christopher Bell, has already put the market on notice of his desire to take the company back into casinos. There remains everything to play for.

j.warner@independent.co.uk

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