Local distributor HarTec last week signalled an aggressive restructuring campaign by laying off over half of its workforce after being burnt by declining margins in the local PC market.
The decision to lay-off 35 staff coincided with the company's exit from the local CPU and motherboard markets. Ironically, HarTec inked a commitment to these same markets in January this year. At that time, HarTec had just finalised its 100 per cent acquisition of local CPU and motherboard distributor NJS.
NJS officials confirmed that it bore the brunt of the staff cuts, losing 30 of its 42-strong workforce with Hartec absorbing the rest.
According to HarTec's managing director, Nelson Siva, HarTec plans to promote its core businesses via a distribution model more focused on "value-adding, services and higher margins".
He added: "We will seek to use this value-added model to replace an approach which was essentially time and place-based."
With the PC business gone, HarTec's core businesses are networking, electronics and manufacturing.
The company's restructuring drive will also see it stamp a new moniker on its networking and cable products - Earth to Air.
NJS' existing networking specialist memory and modem offerings will also fall under the Earth to Air umbrella, according to Avril Danes, ex-NJS marketing manager, and now HarTec distribution manager.
Danes said that NJS will continue to operate as NJS only while it rounds up remaining business relationships and honours existing contracts.
According to HarTec officials the company will continue to trade as and brand its electronics and manufacturing products and services as HarTec Ltd.
NJS was one of only three CPU and motherboard distributors for Intel, until the chip giant appointed Synnex Australia as its fourth recently, a move which diminished the value of HarTec's investment in NJS, according to Siva.
The last straw
According to Siva, the emergence of the new low-end PC price point of $1500 was the straw that broke the camel's back.
"We were selling into tier 3, 4 and 5 Australian manufacturers and this market was becoming increasingly difficult," Siva said.
As multinational vendors such as Compaq and IBM move to seize opportunities in this space, margins shrunk to the extent that HarTec could no longer compete, he added.