Jim Pickup has seen it all. He built up a major distribution business which went to the stock market and has made major acquisitions. He has witnessed management buyouts, has fought against hostile takeover bids and has had to walk away from the business he built up over a decade. He has taken over a business that others have built and has started moving it forward. He has gone right to the top, and back down again, and by his own admission, has made some mistakes. But Pickup has few regrets and remains determined and ambitious.
Pickup is one of the most pragmatic, virtuous and hard-working bosses you will find in the UK computer industry. He is decisive, true to his word and believes in empowering and motivating people. He believes that management should take responsibility for its business, accept the blame for its failures and recognise the contribution of others to its success.
Ten years ago Pickup was MD of Logitek, then one of the UK's top three distributors. It is a time he remembers fondly. 'My time at Logitek is an experience I wouldn't have missed for the world. It was one of the most exciting periods of my life.' Pickup founded Logitek with a colleague in 1979, pre-IBM PC days. 'We felt like pioneers and I had the feeling that something exciting was about to happen.' During the 1980s the market for small workgroup computers and PCs grew at a frenetic pace and those, like Pickup, who had seen the potential early on, reaped the rewards.
Logitek focused on selling products that were made in the US but had no representation in the UK. It was an astute move. Young US companies like Altos relied heavily on their partners overseas. Dealing with Altos was different from dealing with a company like IBM, notes Pickup. The Altos business grew quickly along with sales of 3Com Ethernet products and Wyse terminals. In those days, resellers found that the market was keen to buy multiuser systems running off-the-shelf accounting and database products that cost a fraction of the price of comparable minicomputer systems. 'The product was good, the market was good and the margins were good. And when everyone feels they're doing well there is an atmosphere of bonhomie,' says Pickup.
In the year ended March 31 1986, Logitek made pre-tax profits of #700,000 on sales of #7.3 million. On the strength of this and projected growth, it went public in December. The flotation was presented as a way of raising money to fund expansion and diversification, but Logitek needed the listing to keep its stone rolling.
In 1984, MBS, then the UKs biggest dealer/distributor, had approached Logitek with a takeover bid. MBS owned Microtex, Altos' other UK distributor, and Logitek's only real rival. They agreed on a cash deal early on, but over the six months following, MBS' share price declined. In the summer of 1985, MBS was forced to call the deal off. That was a further embarrassment for MBS, which was floundering and had already announced the deal to the press.
To some degree, the flotation was as important a way of reinvigorating staff morale as it was of raising money. It also allowed the venture capital company, which had put money into Logitek, to be paid off. Going to the market worked on all counts. It raised almost #1 million for the company and valued Logitek at around #7.5 million. Free from debt, with capital to invest and a team of people raring to go, Logitek looked forward to 1987 with confidence.
Over the next 12 months sales and profits almost doubled. Floated at 65p, shares grew to 160p. The plan now was to diversify and grow through acquisition. Services were seen as the key area, a way of reducing Logitek's dependency on hardware margins. Pickup says: 'It was profitable and the channel expected it from us. We were a distribution company. Unless we provided our resellers with those added-value services, all we would have been was a box-shifter. That's not necessarily a bad thing, but a lot of the products we were selling were of high value and their maintenance was important and lucrative.'
Most resellers did not have the resources to maintain systems. They relied heavily on Logitek and looked to it to provide the service. A move into services seemed to be what the City wanted. 'There was the perception that if companies like ourselves were going to develop higher quality earnings and continue to grow, it would come from the growth of services,' says Pickup. The maintenance business grew rapidly in 1987, and in January 1988 it was formed into a separate company, LTSS. Pickup started to think about acquisitions.
Meanwhile Logitek's distribution business strengthened. In the year ended March 31 1988, sales and pre-tax profits grew by around 70 per cent reaching #21.3 million and #2.06 million respectively. In the following year growth slowed to around 35 per cent, but sales of #29.2 million and profits of #2.75 million were better than expected. In July of 1989, Logitek made its move.
It agreed to buy the Advansys group of companies for #10.1 million. It was a fateful move, but at the time it seemed perfect for Logitek. Pickup recalls the mood and says: 'When we bought Advansys our profits were growing nicely. But it was evident that if we continued on this track, it would be difficult to do organically.' At that time, distribution was seen as a dead end for profits. Computer businesses had grown quickly and a high level of growth was expected by shareholders. Logitek was expected to keep up with the pace.
Advansys had three arms: network distributor Azlan, the CSM software house and dealership CSM Systems. This acquisition gave Logitek the diversity and stability it needed to grow further. Quadrangle Training sprung from Azlan and more acquisitions followed - Focalpoint Engineering from Tetra, Unix software house Microdrive and Microtex from MBS. But while Logitek built its business up, some of the new foundations had been crumbling.
Azlan was a good business, and so was CSM's software operation. But their success had masked the deficiencies of CSM Systems. Pickup says: 'Had we acquired only part of Advansys I believe it could have worked well.' Despite scaling back CSM Systems operations, the company was still a liability. With hindsight, Pickup says it would have been cheaper to shut the operation down right away. 'Our plan for post-acquisition wasn't what it should have been. We didn't have experience.' At first the problems were not apparent to outsiders. Logitek turned in profits of #3.83 million in 1990. Turnover was #59.6 million. Margins were thinner, but the overall picture looked good. Logitek needed to raise money to see through its plans for CSM Systems. But by now the recession had bitten hard and in 1990 its results hardly raised a smile. That meant a rights issue was out of the question and Pickup was disappointed. 'In today's market the shares would have taken off. We had always tried to do a good job for the shareholders and suddenly, after the Advansys acquisition, we found ourselves carrying this great big albatross.'
Profits suffered. Pickup sold the CSM Systems business to Computergroup in exchange for a commission on future sales and an undisclosed amount for CSM's assets in August 1990. But profits slumped and an unforeseen takeover of a major customer caused problems for the CSM software business. An agreement with a customer was on the verge of completion when the merger was announced, responsibilities changed and the deal disappeared.
Interest rates were high and Logitek needed to raise money. Pickup explored the idea of selling off the Azlan business. He spoke to Derek Lewis at Technology, but Lewis had reservations about the market situation with Novell. It had just signed an OEM deal with IBM and the channel looked crowded.
The news of Microvitec's interest in the company came to light. In March 1991, it acquired 8.41 per cent of Logitek and put in a #5.9 million bid. Pickup asked shareholders to reject the bid. He told them Microvitec was offering shares in a loss-making company. There was no cash alternative. He continued his efforts to sell Azlan and turned to the company's management. David Randall and his colleagues raised the finance and an intricate game was then played out by the banks, Logitek, Azlan and Microvitec.
The Azlan MBO was approved and Pickup thought that was it, but it wasn't. Microvitec lowered the bid by #2 million. 'They just revised their offer. Then our merchant bank asked if we could be 100 per cent certain of having sufficient funds to continue. Bearing in mind the depth of the recession and our responsibility as directors, we felt we were left with little alternative but to accept the offer. It was awful.'
Pickup left the company at that point, June 1991. He looked at opportunities for some time and in September 1993 teamed up with former Logitek colleagues, Frank Noon and Ian Johnson to buy Xenon Computer Systems. 'It was a case of the cobbler sticking to his last,' says Pickup. Their tenets, having experienced the problems of declining margins at Logitek, were high margins and focus. Xenon was attractive for several reasons. 'It was operating in the right areas of technology, primarily networking, and in the right market, selling service to the end user. It had a reputation for selling quality products.'
Pickup says that coming back to a user business does not mean he thinks distribution is a lost cause. 'You have got to do it in a niche area. Moreover, any company bringing out something in the US is hardly likely to come to a start-up distribution company in the UK. That's not to say there is no profit to be made, but you won't do it selling PCs.' Before buying Xenon the trio looked at a distributor. Pickup confesses a yearning for distribution. 'I miss that part of the industry.'
At Xenon, a software development business that had peaked and a venture in product distribution were terminated immediately following the acquisition. Growth was the aim right from the start. Its previous owners lacked the vision to take Xenon further, he says. 'It was a corner shop attitude. They were distributing the profits and starting from scratch. We shaped Xenon into what we thought it should be.'
Pickup believes the management team's experience from Log-itek will help Xenon to grow with few problems. He also believes they have a talent for identifying quality people and persuading them to become involved. 'Xenon has many good people, some of whom were already here and some who were brought in. We recognise the importance of having quality staff. If you don't stick out for quality it just won't pay off in the end.' He also believes it is important to have the people on your side. 'Having seen the results of cultural differences in our previous companies, we were mindful of the need to ensure that staff adapt to our culture and buy into the plan. People are motivated by the success of the organisation. Of course everyone wants to be well paid and have a nice car, but I'm sure the staff at Logitek and Azlan felt good just before their flotations because they knew they were working for really cracking companies.'
He heartily recommends flotation. 'My experience of being listed was very enjoyable. We didn't do as well with our position as I would have liked, and if I had the opportunity again, I would make sure I had more of the right people around me. Yes, I would do things differently, but being in the public domain is a not a bad place to be.' He adds: 'There is no better feeling than walking out of an investors' briefing having just announced more record sales and profits, with the sense of having made a really good impression.'
Though it claimed many victims, Pickup does not believe that the economic recession can be blamed for all the computer business failures in the late 80s and early 90s. He cites people who survived and succeeded throughout that time - people for whom he has respect. 'The people I admire,' he says, 'are the ones who have weathered the storm.' Pickup says Derek Lewis was recognised as being one of the best managers in the business, a keen advocate of the 'I want to live in a palace not work in one' philosophy and a manager with a clear set of rules that he sticks to come hell or high water.
He believes that Kevin Lomax has done a tremendous job at Misys and has shown that acquisition strategies can work well. He mentions Mike McGoun, chief executive at Systemhouse, who later went on to P&P, and David Southworth, who took the helm at P&P, as good yardsticks of success. The dramatic changes in strategic direction made by P&P since the mid 80s show how important it is to be clear and decisive about strategy, says Pickup. 'It's all about timing isn't it? Just as P&P has had to adapt to market changes, so has everyone else, otherwise they end up curling up their toes.'
Management responsibility, he believes, is the cornerstone of success and says that if things go wrong, it is ultimately down to the management. Pickup confesses to being something of an autocrat in his approach to management. 'It's all a combination of stick and carrot and my personality tends to veer towards the stick. I am a great believer in concentrating on the bottom line.' He believes in instilling a compulsive attitude in staff. 'You must recruit people who are committed and share your desire to achieve. I don't like it when people come to me and moan about a problem. I like them to sort it out on their own.'
Pickup's experiences seem to have hardened his attitude to management. He regards tight management as essential these days, especially for smaller businesses. 'Today's UK computer trade is different from the early days. It once had a sort of carnival atmosphere but it's far more serious now that it's harder to make a profit. Companies have to be more professional. It really is the survival of the fittest. When you are the size of a company like Xenon, you have limited resources and have to make sure you don't make mistakes. There's always some bugger around the corner waiting to take it away.'
The focus, he has always believed, must be on customers. 'If you want to know something about your business just ask your customers. That was true in 1986, but it's more competitive now. When P&P was turning over #10 million, the world was a different place.'
Jim Pickup Founded Logitek in 1979
- Became major UK distributor for Altos, Wyse and 3Com.
- Grew Logitek into a #10 million company and floated it on the London Stock Exchange in 1986.
- Started LTSS maintenance business arm of Logitek.
- Bought Advansys group for #10.1 million in July 1989.
- Saw the startup of the Quadrangle Training arm of Azlan, acquired as part of Advansys.
- Bought Focalpoint Engineering from Tetra, Unix software house Microdrive and Microtex from MBS.
- In August 1990 sold ailing CSM Systems dealership.
- In February 1991 sought buyer for Azlan.
- In the following month Microvitec made hostile bid for Logitek. Pickup resisted, sold Azlan and finally succumbed to Microvitec's revised bid.
- Pickup left the company in June 1991.
- In September 1993 Pickup and former Logitek colleagues Frank Noon and Ian Johnson bought Xenon Computer Services.
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