Local financial results raise Digiland doubts

Local financial results raise Digiland doubts

Digiland has reported $US10.1 million losses and a $US50 million drop in revenue across its Australian operations, fuelling speculation that its local presence is teetering on the edge of collapse.

According to the company's financial results, sales generated by the Australian subsidiary plummeted from $US79.1 million in the 2002/2003 financial year to $US27.3 million in 2003/2004.

Digiland wrote off nearly $US6 million in investments into Australia as a result of poor performance.

"The performance of the Australian subsidiary has been disappointing," the financial report reads. "As a result of the discontinuation of most of the product lines, the company had to write off $US3.5 million of inventories and $US1.9 million of accounts receivable."

Revenue across other country operations - including its Singapore headquarters and China - also declined, causing overall company turnover to fall from US$479.86 million to US$369.45 million.

The financial figures are the latest chapter in what has been a rough 18 months for Digiland. Following the loss of a lucrative distribution contract with HP in September last year, the company parted ways with Epson and Maxtor in November. Digiland has since lost distribution deals with Acer, Linksys, AMD and, most recently, MSI Computers.

A proposed partial merger with local distributor, eXeed, also fell through at the eleventh hour last year after seven weeks of negotiations.

At that time, Digiland CEO, Ong Seow Yong, told ARN the company would focus on boosting its whitebox offerings locally and would be signing up additional manufacturers and new sales staff to foster that side of the business.

However, neither of these two initiatives eventuated. Instead, ARN sources report Digiland Australian staff numbers have fallen dramatically from about 80 employees last year to just 10 at the end of June.

Staff exits include director of operations, Colin de Costa, and marketing manager, James McBeth.

The company has also closed its Perth operations. In addition, capital expenditure into Australia by the parent company has ceased. After spending $US314,000 in 2002/2003, the latest financial report showed no investment into the Australian business during the past year.

Sources close to the company claim it has not ordered new products from Australian-based suppliers in the past three months.

What's more, distribution relationships retained by the local subsidiary were reliant on distribution contracts signed and managed by the company's Singapore headquarters, the source said.

One vendor still maintaining a relationship with Digiland is Impact Systems.

Company managing director, Peter Agamalis, said it had not yet closed the door on its long-­standing agreement with the distributor.

However, severe decline in stock orders throughout the year had forced the company to stop promoting Digiland as an authorised distributor, Agamalis said.

Impact Systems had not received an order from Digiland since mid-June and was no longer sending them leads, he said.

Agamalis said Digiland had originally been one of Impact's biggest distributors for its CMV range of monitors.

But a shortage of stock in the early days of the relationship had contributed to an eventual decline in the size of the agreement, he said.

"CMV was a big success for them, and they were successful in selling the product. They became an important partner for Impact," Agamalis said. "In their day, they were pushing about 7000 hard drives per month and buying a container of monitors a month from us.

"But the fact that they have stopped ordering stock leads us to believe they are closing up.

"Yet if they wanted to, they could pick up business again - they have been around too long not to."

Acting director of Digiland's Australian operations, Frank Tan, and the company's head office in Singapore, both refused repeated ARN requests for comment.

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