The IT industry is losing an estimated $5 billion in lost profits annually because of grey-market sales, research shows.

The survey, commissioned by the Anti-Grey Market Alliance (AGMA), a body that includes 3Com, Cisco, HP, Lexmark and Xerox. The report values the grey market as being worth $40 billion annually in sales.

The study surveyed executives at 63 IT industry OEMs, distributors, resellers and brokers. Grey-market products are branded products that are diverted from authorized distribution channels, or imported into another country without a manufacturer's consent.

The study claims that such products are risky for customers, because they can involve obsolete, damaged or counterfeit parts, and that products are delivered without warranty or support.

The study also makes the claim that 60 per cent of end-users pay the same amount for grey-market products as those from legitimate distribution channels.

"The grey market is a serious threat to manufacturers, customers and authorized distribution channels," said Marie Myers, AGMA chairman.

She added: 'Without utilizing the proper channels and distributors, consumers take the risk of purchasing damaged or products without warranties - this not only hurts the consumer, but can threaten a company's reputation with customers and investors."