MYOB has announced an exit from mainland China and a restructuring of its US distribution as the final stage of a move to refocus its leadership positions in South-East Asia.
After three years of operations in mainland China, MYOB is pulling out of the country because of the current economic climate and a failure to match the growth and momentum in other Asian markets.
MYOB CEO, Tim Reed, told ARN the decision was consistent with a move throughout 2008 to focus on markets where the company has a leadership position and more profitable growth opportunities – namely Australia, New Zealand, Singapore, Hong Kong and Malaysia.
“It’s really been about saying how do we get the maximum return, and we’ve determined the best way to do that is to focus on those core markets, and unfortunately we hadn’t made enough progress in China to consider it a core market,” Reed said.
The company is aiming to improve its strength in those core markets, however, with a recent entry into the Web hosting space and accompanying reseller programs in Australia.
MYOB has also aligned its predominantly US-based Mac sales with a US-based development team. Acclivity – which takes MYOB’s local products to market in the US, predominantly on Macs – has acquired MYOB USA Inc.
“The team that builds our Mac-based products just happened to be in the US. So now they have quite a tight team that spans both product development and product management as well as the local sales market and internal relationships,” Reed said.
“What that means for us is the cost of that product development team in the US is no longer part of our profit and loss. Instead, what we’re doing is licensing back from them the products that we take to market here in Australia.”
The combined effect of the restructuring (at January, 2008 rates) was put at $6.2 million on MYOB’s 2008 pro-forma adjusted EBITDA.
Reed said the current economic climate has not impacted the company because 80 per cent of its revenue is based on recurring revenues from existing customers. However, the company has felt a small impact in recent weeks in SMB new unit sales both in Australia and New Zealand compared to last year.
For 2009, Reed said MYOB will continue to increase its focus in the newly entered Web hosting market.
“We’re doing lots of work with our partner programs, the most recent being the Web hosting reseller program we put out there so IT consultants and other organisations can resell our Web hosting and domain registration services,” he said.
“We do intend to continue to put a lot of emphasis on those small business, Web site building, Web site hosting and domain registration programs in the upcoming years.”
The company also welcomed a declaration by the Takeovers Panel that unacceptable circumstances had been created by some shareholders in giving a commitment to accept the takeover offer from Manhattan Software, and reiterated its recommendation that shareholders take no action on the bid before December 9.
Reed said the streamlining of MYOB’s business operations was not a move to make the company more attractive to other potential takeover bidders.
“The really important thing for us is to build a successful business based on really strong presence in markets and strong client relationships,” he said. “We’ve always believed if we do that then it’s up to the equity markets how they respond to a great business.”