Acorn joins the casualty list

WILLIAM GLEESON

AND MATHEW HORSMAN

Acorn Computers and ICL are the latest in a string of computer companies to feel the effect of tough market conditions in the UK for both mainframe and personal computers.

This latest bad news for the industry comes hard on the heels of a warning on Thursday by Tadpole Technology, the maker of portable computer notebooks, that losses during June would be worse than expected.

Acorn said in a trading statement yesterday that its first-half results would be adversely affected by a downturn in its specialist niche market of schools and colleges to which it sells computers for educational use.

Sam Wauchope, managing director, said Acorn's personal computer business continued to experience difficult trading conditions which would again affect results in the traditionally weaker first half of the year.

Acorn's news came on the same day as a statement announcing its first entry into the US multimedia market with a contract to sell digital set- top boxes to Lightspan Partnership, a US educational programming company.

Problems in the UK come despite a strong showing by Acorn's flagship computer model, the Risc PC, and a performance in line with expectations at associate Advanced Risc Machines.

Gary Johnson, Acorn's finance director, said: "We have been reshaping our business since last year. We are developing new products which won't be ready till later in this financial year when they will make a significant impact on revenues and margins. We hold out the hope the situation will improve in the second half and certainly by 1996."

Mr Johnson said the deal in the United States "will generate very little revenue until 1997. It's a seed for the future."

Acorn, 58.9 per cent-owned by Italy's Olivetti, made pre-tax losses of pounds 3.4m in 1994 after restructuring and a pounds 1.3m loss at its core UK business. In February it launched a pounds 17.2m rights issue to fund development of its Online Media division.

Acorn's share price closed 2.5p down at 90p.

At ICL, tough trading conditions in the mainframe computer business have led to a pay freeze at some of its 10 divisions for up to three months. As a result, a planned 3 per cent pay rise across the board will be delayed for a significant number of ICL's 12,000 UK employees.

The computer company, 80 per cent-owned by Fujitsu of Japan, counts government departments among its big customers, and has suffered from cuts in spending on computer systems and a trend towards outsourcing of data management systems.

An ICL spokesman downplayed the pay freeze, saying the strategy was common in the industry. "It is certainly not being done to head off big losses."

Announcing the company's results in March, Peter Bonfield, chairman, forecast "a good year" for ICL in 1995, despite the difficult market.

"We have stayed in the black consistently since 1982," the ICL spokesman said.

"That is more than you can say for some of the companies with which we are often compared, such as Siemens, Olivetti and Bull, which are all gushing red ink."