Diagonal move splits company
SAP reseller's failure to meld security acquisitions with core business leads to resignations
Failure to integrate multimillion-pound security acquisitions with its core business has split SAP reseller Diagonal, resulting in the resignation of two senior managers.
Last week Diagonal announced it had rejected a management buy-out (MBO) proposal led by chief executive Graham Creswick and financial director Steve Flemming. Both Creswick and Flemming then resigned from the board with immediate effect.
It has not been revealed whether the MBO involved the whole business or parts of it. But Diagonal said it intended to forge ahead with the sell-off of its Secure Networks division, which lost £1.4m in the first six months of this year.
The security unit was set up after the acquisition of resellers EuroStar, CenturyCom and Interop. Diagonal paid £11m in late 1999 for EuroStar and CenturyCom alone but struggled to make them profitable (CRN, 12 January 2000).
According to industry sources, Diagonal had found it difficult to integrate the three VARs, with CenturyCom staff becoming disillusioned with working at the SAP reseller.
"Winning this sort of business is all about contacts. If people left Diagonal, they could have taken business with them. It would have been hard to win new business," the source said.
Last month Diagonal began a restructure which resulted in job losses. At the time, it denied that its security unit was up for sale (CRN, 23 June).
Diagonal has had little alternative but to divest itself of its security division, said Georgina O'Toole, analyst at market watcher Ovum Holway.
"It has looked to support and maintenance to prop up the division. You can't go on relying on that," she said.
Diagonal has gone through several changes within its management team. Director Allan Robb left in July last year, while Colin Burnside rejoined the firm, which he founded, last year. He will now take over as chief executive.
Once it sells its security division, Diagonal will focus on its SAP business. "There are benefits in concentrating on our core competencies," said Mark Samuels, chairman of Diagonal, in a statement.
The reseller was approached for comment but declined to be interviewed.