Network products distributor LAN Systems has been forced to retrench 11 staff under duress from market pressures and a drop-off in its Cisco business following the vendor's decision to deal directly with Gold partners.
Sources close to LAN Systems claim executives from the New York-based parent company, Westcon, flew in to review a significant revenue drop in Australia and to instigate a plan to realign the business accordingly.
Nick Verykios, managing director of LAN Systems, confirmed that 10 per cent of the company's staff had been let go but described the move as "nothing incredibly significant". He said that all staff made redundant have been "extremely well looked after" and that the cuts were "across the board".
"We've had a slight correction in our cost structure," Verykios said. "It is just something that we had to do. We are still high up there in terms of where our revenues need to be . . . we are just overstaffed in certain areas that aren't returning like they used to."
Verykios said that LAN Systems had previously been able to maintain staff levels and continue to grow revenues "despite what is happening in the market". He said that this move comes as a result of the industry downturn "catching up to us" and "changing dynamics" in the channel.
"The value proposition offered by distributors is changing," Verykios said. "It is moving away from the technical support systems back into marketing, lead generation and business development services, which is what customers now want.
"We have to realign our business accordingly."
Verykios said that staff were lost in sales, marketing, professional services, installation services, finance and operations.
Sources indicate that among the 11 to get the axe were the Alcatel and WatchGuard product managers, two staff from accounts, three salespeople, and two staff from professional services.
Verykios conceded that the move by Cisco towards direct relationships with its Gold partners had affected LAN Systems but insisted this was not the only reason for the realignment.
"A lot of our Gold sales are down basically because a lot of products are not available anymore through distribution because of the changes [implemented by Cisco] or not available through the channel at all because of direct [sales]," he said.
"[Cisco Gold sales] were a significant part of our business but it is not just that. We have had several vendors that have been pulling their own resources out of Australia. They have been through their own staff cuts or they have added distributors.
"Given that sales are either flat or in decline in many of the markets that they operate in, revenues do get affected. These are things that are completely outside of our control."
According to a source in contact with ARN, LAN Systems' revenues were down by 35 per cent for the last two quarters. This is something that Verykios flatly denied.
"That is not true at all," he said. "Our numbers were down last quarter. This is the third quarter of our year. For the first two quarters our numbers were up. We were exactly on target. All these things came into effect this quarter so it couldn't have affected the quarter before.
"It could only have happened this quarter so we have had to react very quickly and realign our cost base."