Morse debut on London exchange

MORSE, the reseller of powerful computer servers, yesterday made a cautious debut on the London Stock Exchange after setting its flotation price at the lower end of the pricing range.

Morse shares, which were placed with institutional investors at 250p each, rose 2p to 252p in conditional dealings. Morse had planned to price the shares, which do not start trading fully until next Tuesday, at between 250p and 300p.

Analysts said the flotation had been hampered by signs of a slowdown in the computer market in the United States, fears of a second-half slowdown in the UK, and the poor performance of Synstar, the computer services group, after its flotation last month.

However, observers said the low price attached to Morse shares meant that they were likely to perform well in the next year.

As a result of the lower price, 3i and PPM Ventures, Morse's venture capital backers, decided to hold on to more of their shares. Some fund managers had complained that the investors were selling too large a stake.

At a share price of 250p Morse is valued at pounds 305.7m. The flotation raised pounds 60m in new money for the company, which it will use to pay down debt and help fund its recent acquisition of a minority stake in Partner System, a French reseller.

Duncan McIntyre, the chief executive, said the group's main priority was to use its position as the leading reseller of Sun Microsystems servers to expand its operations in France and Germany.

"We want to become a European company and start exploiting our services business, which is currently only 5 per cent of revenues," he said.

Analysts said Morse is more vulnerable to fluctuations in demand than services groups, which tend to have stable order books.

However, they pointed out that, on a multiple of 23 times earnings for the year to last June, the shares look an attractive prospect.

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