In an effort to expand its online computer hardware and peripheral business, ASX-listed Jumbo Corp has snapped up struggling e-tailer Bozzo Brown's Computer Wholesalers, forking out 400,000 shares in Jumbo for the business.
Jumbo acquired the trading name Bozzo Brown's Computer Wholesalers, the bozzo.com.au Web site, and the customer database and stock from Queensland-based computer hardware and peripheral reseller Internet IT.
In an announcement to the Australian Stock Exchange, Jumbo described bozzo.com.au as a successful Web site that has been operating online since 1993, "longevity that is very rare in the Internet industry", said Mike Veverka, Jumbo's CEO.
However, the Bozzo e-tailing business has been struggling in recent times, with its revenue dropping to $440,000. In 1997, just before the major players started to move their businesses online, Bozzo's revenues were as high as $4.8 million.
Veverka attributed the dramatic fall in revenue to ownership and management changes. "The Bozzo Web site started to lose functionality, it didn't have a large enough product range and the business didn't have enough drive behind it," he said. "Management were involved in too many different things."
Veverka is confident Jumbo will be able to turn the Bozzo business around. "I think we can reach $2 million-$3 million in revenues," he said. "The first thing we'll do is build a new Web site, a search engine and e-commerce functionality, then expand the range of products available on the site."
Veverka said that Jumbo had been watching Bozzo over the last 12 months and had made previous offers to buy the business, but the e-tailer deferred the acquisition until the price was right.
Jumbo will issue 400,000 fully paid ordinary shares as consideration for the purchase and will hold 75 per cent of a new subsidiary company, Online Computing Australia (OCA), which will manage the Bozzo business.
The remaining 25 per cent interest in OCA is owned by Ross McColl, the original founder of Bozzo Brown's Computer Wholesalers and now general manager of OCA. McColl is also the general manager of Jumbo's online hardware business, dealerdan.com.au, in which he owns a 25 per cent stake.
Jumbo plans to tackle both the new and second-hand hardware and peripherals e-tailing market with the Bozzo and Dealer Dan sites. Veverka said that eventually Dealer Dan will be used for the sale of second-hand computer goods while the Bozzo Web site will sell brand new stock.
"Dealerdan.com.au has proven that selling computers online is a successful business model and the new addition will help boost sales."