Virtual Communities looks for profitability

Virtual Communities looks for profitability

Virtual Communities has called a council of war to consider acquisition or merger options, following a loss of $22 million for the last financial year.

Hit by the downturn in the PC market, the company has had to cut staff and curb its growth plans in an effort to achieve profitability. But despite the doom and gloom in the market, chief executive Ed Smith believes the reseller will go the distance in the marketplace.

"It [the loss] wasn't unexpected," he said. "Our original business plan required two years of heavy investment to reach profitability. We have been working on restoring the business and will be moving to profitability in the near term."

Most of the costs incurred came about from setup expenses, the construction of portals and content management tool development, Smith said.

Smith took over the role of CEO in April, succeeding Chris Clarke who remains a shareholder and director in the company, and has taken on the conservative approach of cost control.

"We have reduced staff in areas where the projects have been completed, areas that are in maintenance mode instead of building mode," Smith said. "I am not going to deny that the PC market has turned down, but now we can run with a reasonably slim approach. We still have $47 million in cash reserves and we have curbed our investment plans while we get the core business performing well."

Although the company will most likely post a loss for this financial year, the company will be able to weather the storm and will not go down the same path that led to some of the high-profile collapses seen this year in the channel, he said.

"The loss is a very small fraction of what it was last year, and with our cash reserves there is no risk of that."

Internet services have grown substantially for the reseller, which sells a host of application services as well as the PC, Internet and finance bundles for which the company became renowned.

The ACTU site is hosted, built and run by Virtual Communities on an ASP model and the reseller scored a deal to host and design the distribution sites for BP.

"It can save organisations a fortune in terms of cost because there is no need for technical staff and they don't have to worry about licencing, Web servers, hosting or bandwidth," Smith said. "It is an exciting part of our business because we are enabling not just the end user but also the organisation."

Internet services also remains a core part of the company's consumer strategy.

"At the end of the day, there are still only a third of Australian homes connected to the Internet. Of the remainder, I know the remaining 80 per cent will be there in five years. Someone has to sell those people the device, the service, the delivery and the installation. Whatever the future holds, I am confident we will be a major player in connecting those people. The industry is still very young and the market hasn't run its course. The PC market may have, but the Internet certainly hasn't."

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