Networking distributor Ilion, must be wondering what the next few months are going to bring following last week's revelations that founder Wayne Channon sold his chunk of shares to the enemy.
As exclusively revealed in PC Dealer, Channon sold his 6.63 per cent stake in the troubled distributor to the chief executive of rival Landis, Paul Kuiken. As if Ilion doesn't have enough problems at the moment - since last year, Ilion UK has suffered one problem after another. In its attempt to lure big accounts by operating at very low margins, the perception of the distributor in market became one of being a box shifter, not a value added services organisation.
As a result, Ilion UK was responsible for dragging down the financials of Ilion Group for 1998. As the strategy started to crash around it, senior staff in the UK read the signs and started to jump ship. The defections have continued steadily, with rumours of up to 30 staff leaving. Most recently, its 3Com account manager and Cisco sales manager moved to Landis and Nortel respectively, and Julia Jones, managing director of Faculty, resigned.
Despite the heavy loss - #1.4 million pre-tax loss in 1998 - and the loss of key staff, Serge van Gorkum, chief executive of Ilion, is naturally very optimistic about Ilion UK, saying he expects the division to increase turnover and post profit for the first quarter.
But the Kuiken incident comes right out of the blue and is not something you can factor in on a proposed business recovery plan. You can usually tell when all is not well in paradise when the chief executive of your rival owns more shares than your entire board of directors combined. It's understandable if Ilion is now feeling like a disposable extra in a Halloween movie, constantly looking over its shoulder before something pops out and ends it all in a suitably grisly fashion.
A takeover might not might be too horrific, but one by Landis would not be welcome. From the statements made exclusively to PC Dealer by van Gorkum, Ilion will not go quietly into the night. He said: 'If we can't remain independent ... we at least want to be able choose our partner.' With Kuiken now holding 11.8 per cent of Ilion shares, it is highly unlikely that Ilion is going to have that choice. Even if Kuiken does not use his stake to promote a Landis takeover, he is the first person that other prospective buyers will be calling because his stake will probably be essential to any successful bid.
For the moment, Ilion UK is putting a different structure in place to avoid a repeat of last year's lack of performance, and make good its damaged image. Modelled on the French division, the overhaul of the UK operation will see the creation of product-specific business units run by people with a greater level of expertise.
The number of engineers at Ilion is also set to jump dramatically to dispel any hint of it being a box shifter.
Ilion may be able to turn its financials around very soon, but the writing on the wall asks who exactly will Ilion UK be making money for by the end of the year? Smart money says for someone not called Ilion.
LET'S GET NETWORKING
The networking market covers an enormous range of technologies, from simple connectors to costly hubs in the hardware space, to operating systems, management programs and security suites on the software side. Next week's Perspectives looks at how resellers, distributors and manufacturers are positioning their businesses to take advantage of the massive revenue opportunities on offer and how converging technologies and vendor consolidation will drive the market into the next millennium. Our European Labs also bring you a roundup of the latest firewall products.
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