Cellnet scales down IT distribution

ASX-listed distributor, Cellnet, is scaling down its IT distribution business and will cut staff following a strategic review of its business operations.

Under the new arrangement, the company plans to exit the PC and notebook space and plans to focus solely on servers and printing market segments.

Cellnet managing director, Stephen Harrison, said it will retain relationships with IBM, Asus and Acer for servers and storage, but has given notice to Toshiba, Lenovo, Asus and Acer in the PC and notebook areas. It will also continue to work with several printing vendors including Samsung, Canon, Lexmark and Brother.

Harrison said 35 people had been made redundant across IT including sales, product and back-end.

IT general manager of sales, Aidan Fitzgerald, will continue running the division.

“What we have found over the last six to 12 months is that it’s been impossible for us to work any profit out of that side of the business,” Harrison said. “We’ve looked at lots of different options and ended up making the first move.”

He said several third parties had been talking to Cellnet’s major shareholder, CVC, about a potential sale, but didn’t disclose names. Several industry sources claim Synnex was one of many that considered Cellnet’s IT assets.

Cellnet will close its IT-only warehouses in Victoria, SA and WA. Last month, the distributor revealed it had taken over Scala’s operations in China and was planning to ship more products directly from these international facilities to key retail partners.

In an ASX statement, chairman, Sandy Beard, said a review of the business had shown the IT distribution side of the business was unlikely to return adequate investment to shareholders.

“This decision has been deliberated on for some time and has not been taken lightly,” he said in the statement. “Cellnet has a profitable and growing part of the business in the telco and retail divisions including its print categories and intends continuing to focus on, and grow, these aspects.”

Harrison said it was important to focus on improving profitability in the tough economic climate.

“In these tough times you have to make tough decisions and move with the times,” he said. “The market is not good – people are more spooked than anything else, but in this pre-Christmas period everyone is being cautious.”

The change will cost $2.5 million but is expected to free up $10 million in working capital to invest in the retail and telco sides of the business, Cellnet has said.

Annual revenue will be slashed by $95 million. The company claims to be debt free.

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