The Investment Column: Computacenter set to push the right buttons

COMPUTACENTER, the distributor of information technology hardwareand services, has been a steady if unexceptional performer - untilrecent months. Since November the shares have doubled, making moregains yesterday as annual results confirmed the group's continuingprogress since it floated two years ago.

On the surface, the 16.3 per cent gain in pre-tax profits on an 11per cent rise in sales to pounds 1.76bn would hardly seem to warranta market capitalisation of nearly pounds 2.5bn and a price earnings/ratio of 48. There are, however, several underlying reasons whyComputacenter, despite its recent strong performance, is a reasonablebet to continue to outperform.

One is the move into faster-growth, higher-margin outsourcing andsystems integration, taking the group away from low-margin, low-growth hardware sales. By all accounts the transition, although stillin progress, is proceeding smoothly. Outsourcing and integration,which grew sales by 31 per cent and 41 per cent respectively lastyear, now account for 20 per cent of total sales and over half grossprofits.

What's more, the launch of Windows 2000 and rising competitionfrom rival operating system Linux offers Computacenter dependablefuture growth in updating corporate PCs. The years ahead should alsooffer substantial opportunities to upgrade corporate networks as high-speed internet access technologies spread among business offices. Ontop of that, the rise of e-commerce as a force in UK businessprovides yet another lucrative opportunity.

At the same time as organic growth ripples through, the company isinvesting in Germany and France. Sales in both countries are growingrapidly, although profits are meagre. That is bound to change as theEuropean operations gain scale over the next 18 to 24 months.

In the nearer term Computacenter and its partner, Computasoft e-Commerce, plan an initial public offering - to be helped away byGoldman Sachs - of Biomni, their joint venture business-to-business e-commerce venture. Details on Biomni remain elusive, although itappears that May has been pencilled in as the flotation date.

Biomni's value, and the value per Computacenter share for its 50per cent stake, is extremely hard to forecast. Such a calculationwill depend on market conditions and any strategic enhancements theparent companies engineer between now and the IPO.

Still, as these factors kick further into the valuation,Computacenter, which closed up 20p at 1,422.5p yesterday, is likelyto join the FTSE 100 later this year. Investors should take advantageof the current lull in the stock's ascent. Buy.