DSGi warns of ?20 million profit shortfall

Retailer blames Vista for problems at PC World but questions raised over Tesco and Asda influence
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DSGi saw its shares hit a four-year low yesterday after it announced that sales of Vista had not been what it had expected and as such had created a £20 million shortfall in profits at PC World.

According to the statement, DSGi had expected sales of Microsoft's new operating system to cause a massive spike in demand for both new PCs as well as the software itself; that spike though failed to materialise, leaving as many as 50,000 copies on the shelves of the retailer.

DSGi's finance director, Kevin O'Byrne said that the shortfall had forced the retailer to come up with promotions, in addition to slashing prices, in order to stimulate demand; pointing to the recent Orange broadband deal as an example.

DSGi also said that while it had shifted 50 per cent more laptops, a combination of price cuts, some due in part to Vista demand-stimulating deals and increased competition had contributed to the shortfall.

Microsoft last month admitted that XP's sales were 40 per cent higher that Vista's at the same point, when it was released in 2002.

Shares in the company fell nine per cent on the warning; DSGi's has lost a quarter of its market value in the past few months.

John Browett, the company's new chief executive who takes over in early December when he leaves Tesco said DSG remains cautious 'cautiously optimistic' that his company will have a good Christmas trading period with games consoles, flat-screen televisions and digital camera boosting its profits.

John Browett, the new chief executive of DSG, will have his work cut out when he joins the company from Tesco in early December. DSG remains "cautiously optimistic" it will have a good Christmas trading per-iod with sales of games consoles, flat-screen TVs and digital cameras boosting its profits. DSG, Europe's second-largest electronics retailer, makes around half its annual profits over the Christmas period.

However, questions must be asked how much Vista is to blame for PC World's poor performance; with news that Tesco and Asda stepping up their none-food operations, how much of its poor performance is down to Vista.

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