Cheap broadband to drive hardware sales - TechCentral

Cheap broadband to drive hardware sales

Mustek CEO David Kan

Computer assembler and technology distributor Mustek says dramatic price cuts in broadband, coupled with investments in telecommunications infrastructure, will lead to an improvement in the sales of PCs and monitors and other IT hardware in SA.

The company, which published its annual results to 30 June 2010 on Monday, says rapid improvements in local telecoms have resulted in SA’s bandwidth almost reaching “parity with the rest of the world”.

Early next year, Mustek says in notes alongside its financial statements, SA will be “in a situation where supply of connectivity per capita will be better than most developed countries”.

It says it is encouraged by the plans by the mobile operators to build high-speed third- and fourth-generation wireless networks and also by the competition between Internet service providers that is driving down bandwidth prices.

The company, led by CEO David Kan, says there are opportunities for Mustek to capitalise on plans by mobile operators to build connectivity in rural areas, especially in schools.

And increased demand for multimedia content will “stimulate the need for hardware, high-capacity hard drives, improved graphics and larger monitors”.

Sales are already showing signs of picking up, with Mustek’s volumes in the year to June rising by about 13%. However, the strong rand hit the company’s top line. Revenues fell 2,1% to R3,4bn.

Profit for the year climbed from R52,4m to R64,m, in spite of R4,7m in retrenchment costs.

Cash flow improved significantly thanks to a reduction in inventory levels and an increase in trade and other payables.

The company generated R230,5m in cash from just R11m in 2009.

Mustek has also restructured its long-term finance facilities and repaid R207,5m in debt. This, it says, will lead to significant interest savings in future.

It has declared a dividend of 12c/share.  — Staff reporter, TechCentral

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