Dimension Data treads water

By Iain Scott for Dimension Data South Africa
Johannesburg, 06 Jul 2001

The Dimension Data share, which has been the talk of the market following its plunge this week, was treading water on the JSE this morning.

The share was hammered during the week after the group warned that pricing competition in the products arena would squeeze full-year margins.

It said operating margins would be one or two percentage points lower than at the interim stage.

With interim operating margins at about 10%, analysts say that, assuming all other things remain constant, a one to two percentage point drop could lead to a 10% to 20% lower profit.

While Dimension Data itself has refused to comment on revenue or profit forecasts, several analysts have taken the warning as a signal that short- and medium-term investors should sell their shares.

The Dimension Data share price, which fell from R30.80 on Monday`s opening to R17.90 at yesterday`s close, was down another 65c or 3.63% at R17.25 by noon today.

Volumes were low compared with the rest of the week, with just 3.3 million shares changing hands this morning. The share has recorded a high of R18.20 and a low of R16.75 so far today.

The fall has also taken a toll on the IT sector, which by 11am had had dropped about a third since the start of the week.

The IT index, which opened the week at 508 points, had plunged to 336.4 points by 9.30am, recovering to 344.8 by 11am.

Datatec, which has also fallen in sympathy with the Dimension Data plunge, was trading at R18.30 at midday, down 60c or 3.17% from yesterday`s close. The Datatec share opened the week at R21.80.

Nedcor, which has an 8% stake in Dimension Data, was trading at R147.60 at noon, 40c lower than yesterday. The share began the week at R158.