Optima demise sounds industry alarm bells

Optima demise sounds industry alarm bells

Industry peers of embattled PC assembler, Optima, have expressed concern after the company went into voluntary administration. But while recognising it as another blow to the whitebox industry, several insisted there are still opportunities for smaller builders that can diversify.

Optima's directors appointed Moore Stephens as voluntary administrators for its PC manufacturing and Digital City retail subsidiaries on July 24. The decision came a week after it suspended shares trading on the ASX.

More questions were raised when one of Digital City's suppliers, Multimedia Technology, revealed it had started legal proceedings against the retail chain for failing to pay back several hundreds of thousands of dollars.

Administrators are now wading through Optima's list of creditors as well as determining how to proceed with the business. Co-administrator, Rick Porter, confirmed Commonwealth Bank as a secured creditor. Unsecured creditors are thought to include Ingram Micro and Synnex as well as staff.

Managing director of PC and components distributor TodayTech, Jack Zhong, said Optima's demise sounded alarm bells for its industry peers as well as customers. He predicted more consolidation could be on the cards.

"This is bad news for the industry and will affect customer confidence, the vendors and most importantly those government and corporate clients," he said. "Everyone will tighten their control on things like credit to minimise their exposure to risk and that will have a bigger and more longterm impact.

"This doesn't help a market that's already suffering."

In its ASX statement, Optima chairman and managing director, Cornel Ung, said it had been operating under "fierce pressure" from multinational vendors for several years but was dealt a major blow when it lost preferred supplier status to the Queensland and NSW Departments of Education and Training. He also blamed losses across its Digital City retail business.

IDC PC analyst, Felipe Rego, predicted Optima's demise could have a negative flow-on affect and expressed concern for smaller players.

"When the leading local manufacturer suffers, the smaller guys also get concerned," he said.

According to IDC figures, Optima suffered a 35 per cent drop in PC shipments between Q1, 2007 and Q1, 2008. In comparison, total PC sales grew by 15 per cent over the same timeframe. At its peak in 2003, Optima represented 3.6 per cent of the total Australian PC market. By 2007, this had dropped to 1.4 per cent. In the most recent quarter (Q1, 2008) IDC reported its marketshare was down to 0.8 per cent.

Over the same timeframe, the total whitebox market experienced a 2.6 per cent decline, while the rest of the market grew 66 per cent.

ASI Solutions managing director, Ken Lowe, said the ongoing trend for state PC procurement had triggered predatory pricing from multinationals. This had increasingly taken its toll on local PC manufacturers.

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Tags SynnexIngram MicroOptimaMoore StephensCornel UngRick PorterJack ZhongKen LoweTodayTechFelipe RegoDigital CityASIMultimedia Technology

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