Computer giant seeks creditor protection

Germany: Escom crisis deepens as losses mount 8 Jobless totals likely to remain high in the short term

Escom, Germany's second-largest computer retailer which bought the former Rumbelows chain in the UK last year, filed for protection from creditors yesterday after mounting losses. Escom shares on the Dusseldorf stock exchange were suspended following the company's announcement that it would begin "intensive talks" with suppliers, creditors and shareholders about "stabilising" finances.

The filing follows Monday's announcement that Escom was closing 65 of its 233 UK stores with the loss of 227 jobs. Yesterday the company said the UK business would not be affected by the problems of the German parent. "Escom confirms that it will continue to trade in the UK and that it has the full support of its banks," it said.

Escom UK was established as a separate business from the German parent in May. The company says its management accounts show that the UK business made a profit of pounds 1m last year. "The UK PC market is booming, it is the German market that is in recession," a spokesman said.

In March, the Escom group reported a net loss of DM125m (pounds 52.5m) for last year, but latest figures put the shortfall as high as DM180m, and yesterday it forecast another substantial deficit for the current year. The company presented a restructuring programme earlier this year but had been unable to reach agreement with creditors and suppliers to protect liquidity. Of the DM100 sought in capital injections, only DM60m has flowed into the accounts so far.

News of Escom's difficulties follows an announcement by Digital on Tuesday that it is to cut 7,000 jobs after problems in its computer business in Europe. Digital is the world's second-largest computer company after IBM. The problems affecting all computer companies are falling PC prices which have forced many manufacturers to give rebates to dealers on unsold stock.

For 10 years Escom had been one of the success stories of German industry. Turnover rose 90 per cent annually, turning the computer shop into a global manufacturer and retailer of cut-price home PCs.

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