High UK costs deepen Escom's losses

Escom, the German computer-maker that took over Rumbelows last year, warned yesterday that its losses for 1995 would be sharply higher than forecast last week, writes Russell Hotten.

The company had forecast it would sink about DM45 (pounds 20m) into the red, by has now said that the real figure would be more like DM125m (pounds 55.5m) because of slow year-end sales and high UK costs.

Escom, the second biggest retailer of computers in Germany behind Kaufhof AG's Vobis, said the massive loss meant it had to raise DM40m from banks and another DM60m through a share offering.

"The sales turnaround in Germany and the world-wide drop in computer prices have continued through mid-February," Escom said.

Shares in Escom, suspended on Wednesday at DM16.35, fell to a record low of DM11.95 before steadying around DM. Escom, considered the 10th- largest computer seller in Europe, is the latest personal computer manufacturer to report weaker profits or a loss for 1995 due to weak sales in the normally buoyant fourth quarter, including Christmas.

Some analysts said the European market would see tough price competition after the marked slow-down in business, and Escom could cut prices in order to rebuild market share.

Industry tracker Dataquest said Escom's market share in Europe fell to 3.2 per cent in the fourth quarter from about four per cent in 1994.

But industry analysts said Escom itself, majority-owned by founder Manfred Schmitt, must take the blame for its plight.