Mustek puts faith in AI as interim earnings falter
Rising demand for AI-empowered operating systems could see renewed surge in hardware upgrades
06 March 2024 - 16:27
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Mustek is banking on the growth in artificial intelligence (AI) to help boost sales of its computer hardware business after reporting a sharp drop in interim earnings.
“The recent release of AI-capable systems by large OEMs [original equipment manufacturers] together with a strong focus from operating system providers in 2024 is likely to drive refreshed demand in the commercial sector,” the company in its interim earnings statement on Wednesday.
AI investment grew exponentially in 2023, driven by the rapid adoption and popularity of OpenAI’s ChatGPT since it was launched in November 2022.
Technology companies have since sought to capitalise on the trend through AI-backed services or software platforms, while others benefit from growing hardware demand to power such systems.
“AI-generated content and large language models require tremendous computing power, bandwidth, and high availability of data. Not only does this drive opportunity for hardware refresh but also for the enablement and training of skills that are required to apply these technologies responsibly, securely, and sustainably,” said Mustek.
The group sees the wider availability of Microsoft Copilot — an AI tool now integrated into the software giant’s Office suite — being the main driver of growth.
Mustek, valued at R589.78m on the JSE, is an assembler and distributor of ICT products. It was established in 1987 and listed in 1997. The bulk of its revenue comes from sales of hardware brands including Acer, ASUS, Samsung and Lenovo.
Revenue for the six months to end-December declined 13% year on year to R4.27bn as the business was hit by the current economic downturn and accompanying high inflation and interest rates, and poor consumer and investor demand and confidence.
Even Mustek's green energy products, which had been a key driver of revenue growth in the previous comparative period, fell 55%.
The group’s two largest segments Mustek and Rectron saw revenue decline by 15% and 9.9% respectively. Its IT training company, Mecer Inter-Ed experienced a slight decline in revenue to R46.2m from R48.8m.
Operating profit dropped 25.4% to R180.6m, while headline earnings per share — which strip out the effect of one-off financial events — slumped 58.81% to 91.34c.
Besides of AI, Mustek says small and medium sized businesses “which have delayed upgrading due to economic conditions, remain a large PC growth sector”.
Last month, Anthony Clark, an independent analyst at Smalltalkdaily Research, noted that prospects for the company “remain optimistic.”
“The replacement cycle for government technology upgrades should start to filter into 2024, and the post-pandemic sales splurge of home office equipment should also provide some sales growth into 2025. Mustek’s move into greater technology and software services also provide comfort.”
“Sustainable energy remains the wild card as perversely worsening levels of load-shedding are needed to resurrect sales growth,” Clark added.
No dividend was declared for the period.
Mustek shares were down 0.37% to R10.36 shortly before the JSE close on Wednesday.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Mustek puts faith in AI as interim earnings falter
Rising demand for AI-empowered operating systems could see renewed surge in hardware upgrades
Mustek is banking on the growth in artificial intelligence (AI) to help boost sales of its computer hardware business after reporting a sharp drop in interim earnings.
“The recent release of AI-capable systems by large OEMs [original equipment manufacturers] together with a strong focus from operating system providers in 2024 is likely to drive refreshed demand in the commercial sector,” the company in its interim earnings statement on Wednesday.
AI investment grew exponentially in 2023, driven by the rapid adoption and popularity of OpenAI’s ChatGPT since it was launched in November 2022.
Technology companies have since sought to capitalise on the trend through AI-backed services or software platforms, while others benefit from growing hardware demand to power such systems.
“AI-generated content and large language models require tremendous computing power, bandwidth, and high availability of data. Not only does this drive opportunity for hardware refresh but also for the enablement and training of skills that are required to apply these technologies responsibly, securely, and sustainably,” said Mustek.
The group sees the wider availability of Microsoft Copilot — an AI tool now integrated into the software giant’s Office suite — being the main driver of growth.
Mustek, valued at R589.78m on the JSE, is an assembler and distributor of ICT products. It was established in 1987 and listed in 1997. The bulk of its revenue comes from sales of hardware brands including Acer, ASUS, Samsung and Lenovo.
Revenue for the six months to end-December declined 13% year on year to R4.27bn as the business was hit by the current economic downturn and accompanying high inflation and interest rates, and poor consumer and investor demand and confidence.
Even Mustek's green energy products, which had been a key driver of revenue growth in the previous comparative period, fell 55%.
The group’s two largest segments Mustek and Rectron saw revenue decline by 15% and 9.9% respectively. Its IT training company, Mecer Inter-Ed experienced a slight decline in revenue to R46.2m from R48.8m.
Operating profit dropped 25.4% to R180.6m, while headline earnings per share — which strip out the effect of one-off financial events — slumped 58.81% to 91.34c.
Besides of AI, Mustek says small and medium sized businesses “which have delayed upgrading due to economic conditions, remain a large PC growth sector”.
Last month, Anthony Clark, an independent analyst at Smalltalkdaily Research, noted that prospects for the company “remain optimistic.”
“The replacement cycle for government technology upgrades should start to filter into 2024, and the post-pandemic sales splurge of home office equipment should also provide some sales growth into 2025. Mustek’s move into greater technology and software services also provide comfort.”
“Sustainable energy remains the wild card as perversely worsening levels of load-shedding are needed to resurrect sales growth,” Clark added.
No dividend was declared for the period.
Mustek shares were down 0.37% to R10.36 shortly before the JSE close on Wednesday.
gavazam@businesslive.co.za
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