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Investment Column: Brief fling is over for Computacenter

HAS THE City fallen out of love with computer stocks? Shareholders in Computacenter must think so. After all, when the giant distributor of computer products and services joined the stock market in May the affair was still in full fling. But after a brief jump, shares in Computacenter have come tumbling back down again. Yesterday, despite a strong set of half-year results, they fell 9p to 688.5p - leaving them just 18.5p above the flotation price.

On the face of it, this looks harsh. In the six months to June profits jumped 42 per cent on a 39 per cent increase in revenues. The French business did especially well. And Computacenter picked up new contracts with the likes of the Post Office and the Automobile Association.

However, a number of one-off factors swelled the figures. A new licensing deal from Microsoft provided a one-off boost to sales. A huge government supply contract contributed revenues of pounds 50m in the first half, but second- half sales will probably be about pounds 10m. Meanwhile, a French competitor's financial troubles allowed Computacenter's subsidiary there to lift sales by 63 per cent.

The company's dependence on reselling computer hardware remains a worry, especially given the success of direct-sales specialists such as Dell. Products account for about 80 per cent of revenues, with services making up the difference. While Computacenter's model of offering a one-stop shop comprising everything from planning to maintenance is compelling, it will provide little shelter if personal computer prices continue to plunge.

Albert E Sharp, the stockbroker, forecasts full-year profits of pounds 58.9m, producing a forward earnings multiple of 32. Computacenter is a solid, well-run business. But until it can show more evidence of growing service revenues - such as through its mooted electronic commerce consultancy - the shares are no more than a hold.