After 19 years Melbourne Compaq distributor Company 29 is closing its doors before it gets completely overwhelmed by the scramble to establish a rationalised Compaq channel.
According to director Alan Tainton, the decision to get out now was based on the fact that margins are becoming increasingly tight and the market is at the moment more conducive to big distributors such as Tech Pacific. "The return as a distributor in the Compaq market is not good and we can get much better elsewhere without the risk," explains Tainton. He perceives the current Compaq channel rationalisation as the "fight for market share in the future by one or two distributors. We didn't want to fight." He suggested Company 29's $25 million annual revenue did not give them a realistic chance of survival.
Consequently the decision to shut down preceded the current round of Compaq discussions as Tainton had forecast they would not be able to sustain adequate growth rates to remain solvent in what Tainton describes as "the genuinely tough Compaq market". In the end it came down to the fact that Company 29's "capital could be better used elsewhere".
Company 29 will walk away from the IT industry with nothing owing according to Tainton. "We are very sad about having to do this but we have done it in a way that retains our friendships with our suppliers and allows shareholders to walk away with some money. Everyone we owe money will be paid. Staff will be paid out in full and all customer obligations will be met."
Tainton claims the entire "voluntary shut-down" will be achieved when the company's lease runs out in four months. Staff have already been laid off and the business is operating in "closed-down mode", according to Tainton.