LAN Systems looks for backing

LAN Systems looks for backing

Despite insistent speculation that LAN Systems was about to be acquired, company officials last week maintained that it was not up for sale.

However, CEO Scott Frew did concede that he will need additional financial backing if he decides to a launch a European "channel services" and distribution operation.

If the European operation gets up and running it will be called MarketEntry, Frew revealed to ARN. The operation will be based out of Brussels, which is Frew's new home after he flew out of Australia last week (ARN, June 16, page 24).

Frew will decide within the next two months whether the LAN Systems channel services model, which sees it sell services through resellers, is applicable to the European market.

Speculation ran riot last week that Frew was leaving the country for tax reasons as he was about to sell LAN Systems to South African networking powerhouse Datatec. Datatec owns networking distributor Westcon and the CNI integration group.

But LAN Systems chief marketing officer Nick Verykios told ARN that he had already assured a number of the company's key resellers, who had also heard the rumours, the company was not being acquired. He said LAN Systems was always being courted by various suitors but it was interested in raising extra capital, not selling.

In his final interview before heading overseas (see page 68 for full interview) Frew admitted that he "was always willing to talk to potential partners because you never kill an opportunity before you explore what the opportunity is". However, he was quick to add: "We're very profitable and we're growing so we're a target, but we're not in a position where we are for sale or want to be brokered.

"We have, though, exhausted our current financing. So we are looking for someone with the right sort of deal to fund the stock and cash we are likely to need for MarketEntry" Frew said.

"I am reluctant to give up any equity up-front."

Frew said he was talking to venture capitalists, invoice discounting firms and major banks. He claimed selling to a traditional time-and-place distributor, with whose name LAN Systems would be perpetually linked, was the least likely option.

"I could walk away with the cash from a time-and-place distributor, but I have responsibilities to 45 employees in this operation. My last company was acquired by Net- Comm and I learned what not to do with an acquisition because they screwed the purchase within six months," Frew said.

"If I walk away and the company fails to achieve the goals we've set out to do, my reputation wouldn't be as good. But if LAN Systems is successful when I walk away, well then I can do it again. With a time-and-place distributor we can't do that, because all they care about is their 3 per cent margin."

Verykios added that if LAN Systems was to ever sell to another IT distributor, it would be "someone who wanted to invest in the model".

"You have to remember, though, that Scott has never hidden the fact that his plan is to float," Verykios said. "At the moment, our ideas far outweigh our ability to deploy them profitably. But bear in mind, it may be appropriate for us to team with someone way out of left field.

"For example, one kind of company that has been talking to us has been in the consumer electronics space. They need to understand IP technology, just as much as telcos needs to understand it. And we have the expertise in IP. Very few consumer electronics distributors are time and place."

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