UK distributor and tablet maker KMS Components has become the first major channel casualty of 2014 – apparently after the loss of its largest customer and a licensing bust-up with Google left it with a mountain of unsold stock.
The Cardiff-based outfit went into administration yesterday afternoon, leading to the immediate loss of 34 jobs and leaving some suppliers with debts of up to £500,000.
Deloitte, which is handling the administration, confirmed that it plans to cease trading but will retain 21 staff for a short period to handle customer support and returns.
According to multiple sources, KMS was floored after its largest retail customer, Argos, refused to take any more of its CNM-branded tablets. This came after an alleged spat with Google over whether the tablets were correctly licensed.
Sources have speculated that the two events were linked and that the set-to with Google prompted Asda to refuse more stock. But even if not, they are acknowledged to be the two triggers that sent KMS under.
KMS' demise caught many off guard as its financial performance was on the up following its decision to move beyond its roots in components distribution into producing its own-branded IT equipment including tablets and docking stations. The distributor still held contracts with a range of component vendors, most noteably ASUS.
KMS' last filing on Companies House indicates that it saw profits boom more than threefold to £1.05m on revenue that rose 17 per cent to £47m in its financial year to 31 December 2012.
Alan Norton, head of intelligence at credit reference agency Graydon UK, said: "Events seem to have happened very quickly. On paper their financials looked extremely good so this is an unexpected business failure."
Calls to KMS' switchboard went unanswered, while its website was down this morning.
The firm's collapse is likely to send a big ripple through the channel, with some suppliers believed to be owed as much as £500,000, although its strong financial performance may mean much of those debts will have been credit insured.
The administration is being handled by Richard Hawes and Matt Smith of Deloitte, the business advisory firm confirmed.
"The administrators will seek to realise the company's remaining assets; property; trade debtors and stock," it said in a statement sent to CRN.
Argos continues to offer a range of CNM-branded tablets on its website, ranging from £79.99 to £219.99 in price, although multiple sources say it is no longer accepting new stock.
In a statement sent to CRN, Argos said: "We do not comment on market speculation. We are aware that KMS Components supply a number of UK consumer electronics retailers and have supplied Argos in the past."
Google had not responded to our requests for comment at the time of publication.
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