IN BUSINESS - Clash of the Titans

A year ago, Info'Products acquired reseller Simmons Magee, and theing and some key staff departures. Significant financial discrepancies have now been uncovered and the reseller is scrabbling to get its house in order. resulting culture clash and accusations of bad management caused some key staff from both sides to jump ship.

One year on and some ex-Simmons Magee staff are bitter at their treatment and Info'Products has admitted its financial results for the year ended 31 December 1997 have not met expectations. Most recently, the company has been hit by a fresh spate of staff departures, and all this on top of losing its accreditation with Compaq at the beginning of this year.

The Simmons Magee acquisition got off to a rocky start, with some key staff leaving after the March 1997 takeover of the #60 million Richmond-based reseller.

Former Simmons Magee managing director Simon Ognall and ex-marketing manager Tim Hall quit the company one month after the buyout. In June, both took up positions at rival reseller Bytes Technology Group. Ognall, now MD at Bytes, describes Info'Products' handling of the acquisition as 'inept'. He says the bad management of the integration process was his reason for leaving the reseller.

'Simmons Magee had a strong people culture built around 20 or 30 key individuals,' he says.

'Info'Products was process driven, but the integration took no account of personalities. There was different management between the two companies: I ran Simmons Magee, Info'Products was run by an accountant, and still is.' He adds that Info'Products was too straight-laced and many ex-Simmons Magee individuals were 'too rich for Info'Products' blood'.

According to Hall, marketing director at Bytes, Simmons Magee staff left because Info'Products' employees were given preferential treatment. He says: 'Simmons Magee people took second place to Info'Products' and were effectively sidelined. Info'Products was badly managed at the time and let a lot of key staff slip through its fingers.'

Info'Products MD at the time, John Trueman, agrees that Info'-Products was a much more controlled operation than Simmons Magee. But he argues this is due to its status as a public company. Because Info'Products is publicly owned it 'has to do regular reporting and forecasts', he says.

'Staff were driven by targets and were more professional.'

Trueman disregards criticism of bad management of the integration, saying: 'This is probably an emotional statement from someone who wasn't in support of the acquisition.' He denies accusations that Info'Products' staff were given preferential treatment and points out that at least six out of about 15 senior managers were ex-Simmons Magee employees when the company was combined.

Howard Dickel, Info'Products director of business development at, also refutes accusations of favouritism: 'I think Info'Products handled the acquisition very well, especially from a people perspective.' He admits there were different cultures at the two companies, adding: 'There is a problem with people going from smaller to larger companies. Some love the smaller company mentality and vice versa.'

Trueman describes the acquisition at the time as 'a complementary business'. He sticks to this, saying the customer set was complementary. But some observers question how well suited the two resellers were and say that Dutch parent company KNP BT had, and still has, too much control over Info'Products.

Over the past couple of months, there has been a renewed spate of departures from the reseller. Former principal consultant Simon Cavell left in February and former IT manager Jon Upfold quit in March. Ex-managing consultant Alan Sutcliffe left the company in April and account manager Mark Kelly, who ran the Citibank account, is also set to leave the reseller to join Computacenter.

Insiders say this second round of exits follow disagreements over plans to outsource Info'Products' systems integration business, and the fact that the reseller is focusing on turnover rather than profit.

Dickel believes the company is following the right strategy by outsourcing the systems integration side. He says costs in these areas were too high and comments: 'We are not reducing our services but looking at smarter ways of deploying them.' He says of the departures: 'We are in an industry where there is a lot of movement,' and adds that Info'Products is replacing the lost staff.

The reseller admitted earlier this year that its financial results for the year ended 31 December 1997 were disappointing and conceded it did not realise the expected business growth from its acquisition of Simmons Magee. An industry source says Info'Products made substantial losses of between #3million and #3.5 million in 1997 in the UK, compared to a #2 million profit reported the year before. He adds that turnover for 1997 was down to #170 million from #210 million.

Insiders also say losses made over a three-year period were not reported to the parent company, resulting in financial discrepancies of at least #10 million. These discrepancies in the accounts were discovered by Dutch parent company KNP BT late last year and a thorough shake-up of Info'Products' management team followed.

Huib Winkel was brought in as joint MD at the beginning of this year and three weeks after that Trueman left by 'mutual agreement', according to his successor.

In January, Info'Products former director of finance Scott Pheby and former sales director Andrew Douglas also left.

Trueman, now MD at Matlock-based Servo, refuses to comment on the financial discrepancies found in Info'Products' accounts. But he rejects suggestions that the discrepancies were covered up for three years, saying: 'I deny that was the reason I left Info'Products.' Asked why he left, he says a joint decision was reached. He stresses that he bears no animosity towards Winkel or Info'Products and he was not forced to leave. 'Huib was brought in as joint MD because Info'Products was going through a major programme of change, and he needed the level of authority.'

Paul Morgan, director of finance at Info'Products, says he cannot comment on figures, but he does not deny that the company made losses of between #3 million and #3.5 million in 1997. He will not comment on the size of the financial discrepancies, but admits the company has been hit by substantial losses. However, he denies that the losses were covered up over a three-year period, arguing they were accumulated over two years.

Dickel refuses to comment on financial discrepancies or the 1997 losses.

He only says 'there has been some tightening up in areas of special bid rebates and marketing funds'.

Info'Products' financial situation can be partly attributed to the loss of some key accounts inherited from the Simmons Magee acquisition. An industry source says the company lost accounts with Scottish Nuclear, Harper Collins and 50 per cent of Chase Manhattan. He says the companies switched because they were not happy with Info'Products' level of service. Dickel confirms the company has lost the accounts, but rejects any suggestion that Info'Products' service levels were called into question.

In addition, the reseller lost its Compaq service accreditation, effective from 1 January this year. The reseller has still not regained the higher end systems service provider (SSP) status.

Peter Blampied, Compaq commercial business integration manager, says the SSP accreditation is tough to fulfil, and Info'Products wasn't up to standard at the end of last year. He maintains it is more of a training issue and the reseller is still respected by the manufacturer. Dickel says the reseller had a re-audit at the start of April, and claims he is '98 per cent sure we'll regain the accreditation by June'.

Ingram Micro vice president of sales Lloyd Pinder says he believes that Info'Products will be strengthened due to the loss of the Compaq accreditation.

He argues: 'Customers are cynical about the accreditation.' One reseller source claims Info'Products' service is better now than when it was accredited.

Info'Products' Winkel is now trying to correct the difficulties encountered since the Simmons Magee acquisition. He brought in Dutch consultancy firm Team Consult to get the Info'Products' transformation programme started and it is now in the last stages of its part of the implementation.

Info'Products, although still a big player, is arguably not as strong as it once was, according to some competitors. At Computacenter, head of corporate marketing Phil Williams says although Info'Products is not a main competitor, he still sees its position as weaker than it was. He says: 'Even though we don't compete with Info'Products very often, we come across it less than we did last year at this time.'

Certainly, Info'Products' distributors are keen to confirm its sound reputation. Graeme Watt, UK MD at Computer 2000, says Ingram Micro may be Info'Products' preferred distributor, but Computer 2000 still does a reasonable amount of business with it. He says: 'I can't say we do less business with it now than a year ago.'

Info'Products' parent company KNP BT says that, despite industry speculation, it has no plans to sell off Info'Products. KNP BT corporate communications manager, Patrick Deleede says it is highly unlikely to sell the reseller due to KNP BT's moves to concentrate on the parent company's IT division.

KNP BT is pressing ahead with plans, unveiled in February, to split the packaging and PC divisions at the parent company. This involves selling off the packaging arm - which still needs a buyer - to focus on the PC side. Deleede says the Dutch company is cutting down the initial list of 12 interested parties. He adds: 'The money from the sale will be invested into the distribution activities in general: office products, paper merchandising and maybe Info'Products.'

Pinder views the split as a reflection of the parent company's confidence in the PC side: 'KNP BT realises it will get a good return from the PC side, and has a good customer base.'

In terms of future purchases, Deleede says the company will look to continental Europe for any Info'Products acquisitions, rather than the UK. He refuses, however, to comment on likely candidates. The money from the KNP BT packaging arm sell-off will fuel acquisitions or organic growth, he says. An industry source believes the company will opt for the acquisition route and it is expected to target Germany.

As part of this consolidation between the UK and European markets, KNP BT is still in talks with Societe Generale over French distributor and reseller Allium. KNP BT and Societe Generale each own a 50 per cent share in Allium, but KNP BT hopes to take over 75 per cent and merge Allium with Info'Products.

Info'Products UK's future strategy lies in reducing its customers' total cost of ownership, according to Dickel. He says this, together with outsourcing certain services, is the way forward. 'This industry has got to look at working smarter. You cannot be a master of everything.' He denies accusations that Info'Products is in chaos, saying: 'This is not the case. Info'Products is going through a lot of change.'

Insiders say it needs to find a strategy and stick to it. They complain that the long-term strategy is being hindered by the short-term nature of the appointment of the interim MD which is set to end on 30 June.

After buying Simmons Magee, along with its reputation for services, Info'Products was going to concentrate on being a services organisation. Now the reseller has announced its decision to outsource services, while competitors are building up their services in-house. Observers say Info'Products needs a clearly defined direction along with commitment from the board, then perhaps the company will start to make the future look more stable and begin to inspire staff loyalty.

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• Topics
• Management