It promises to be a very interesting couple of months for Cellnet. After shareholders voted overwhelmingly last week to float its mobile content subsidiary, Mercury Mobility, the Brisbane-based distributor's share price took a significant hit. At the time of writing, on the day the demerger was due to be finalised, Cellnet was trading at $0.90. At the start of the year, shares were worth $1.34; back in October they touched the dizzy heights of $1.60. Soon after, it gave notice of a disappointing six months to the ASX and its price has pretty much been on a downward trend ever since.
The decoupling of Mercury Mobility makes perfect sense because a distributor and a mobile content provider are hardly a match made in heaven. But while the future looks bright for Mercury, you have to wonder about Cellnet's prospects.
The company lost two vendor contracts last week and, although Sony headphones and Neoware thin clients are hardly the mainstay of its business, you can be sure its larger vendors are keeping a watchful eye on its progress. And given that a venture capitalist firm owns almost a quarter of the shares, it will be looking closely at how to get the best return on its investment. While some in the industry have questioned Cellnet's ambitions after it appointed CFO, Mark Bloomer, to the chief executive's role, he certainly has the right skill set if the business is to be broken up for a sell off.
With no news yet on a replacement CFO, or sales director for that matter following the departure of Martin Bicknell, Bloomer is essentially doing three jobs. That is not a realistic long-term option and the longer this situation goes on, the more skeptical I will become.
Given the rough time Cellnet has endured in the past year, it could well be that the business as a whole is no longer equal to the sum of its parts. Its telco businesses in Australia and New Zealand are both profitable and would be sure to attract bidders. Its IT distribution unit would also be an attractive proposition in a consolidating market. Former CEO, Adam Davenport, put a lot of time and effort into trying to acquire Dicker Data but now the tables could well be turned.
The IBM server contract would be of particular interest to Dicker and other potential suitors, who could include itX. Its managing director, Laurie Sellers, has made no secret of his desire to grow through acquisition.
And although Cellnet is larger and has more vendors than the targets he has outlined, distress signals might just attract his attention.
A fresh broom can sweep clean and he could always terminate agreements with some of the smaller vendors. The other possibility would be a large overseas distributor using an acquisition as a way into the Australian market but that looks increasingly less likely.
• In the weeks ahead, ARN will be launching a Vendor Directory as a valuable resource for your business. In it you will find comprehensive listings of the vendors in all major categories, essential contact details and their distribution partners. Our Distributor Directory is now well established as a 'who's who' of distribution and this new guide will round out our offering.