ASX-listed broadband distributor Quadtel has announced its acquisition of retail distributor Marketing Results.
Known in the industry for its niche focus, the distributor will continue to operate as a separate business entity, but Quadtel's warehousing operations have already begun to integrate Marketing Results' back end, according to former Marketing Results (MR) managing director Rod Orrock.
Orrock now reports to Quadtel CEO David Ramsay but will run MR as he has in the past, although he admits being an employee again after heading up his own company for 10 years is "very strange".
At a cost of $600,000 cash, and more than four million shares, Quadtel will use MR to sell its ADSL and broadband products through major Australian retailers such as Harvey Norman, Dick Smith and Harris Technology. In return, MR will branch into overseas markets.
"We were getting to the point where we were turning over $10 million a year. So we looked at our financial capabilities and realised that if we want to grow the business, we need some assistance," Orrock explained. "We are a profitable business so there wasn't enormous pressure to sell the business. But we realised we had to make changes in order to grow in the market place. Quadtel has a better financial resource and long-term capability to do that."
Having prided itself on its niche distribution model for years, and at a time when most companies are back-peddling as fast as they can out of retail distribution, MR is now looking at growing its vendor base. Quadtel has offices in Singapore and Malaysia, and will soon open an office in New Zealand - an opportunity for MR to become a bigger player in the region, according to Orrock.
"While ADSL and broadband products have not been initially focused at the SME and consumer market places, that's all changing," he said. "In Singapore, you can walk into an outlet and buy an ADSL modem. This will soon be possible in New Zealand and that is where we will eventually get to in Australia. Telcos don't want to be modem suppliers, and Quadtel understands that, but they need to be able to access that market place.
"We understand the market and we have the ability to put together attractive retail packages, so Quadtel sees us as a very attractive prospect."
The deal follows Quadtel's first attempt to acquire national IT distributor CHA. The acquisition fell through late last year after CHA lost faith due to the declining value of Quadtel's shares, which slipped sharply after the tech stock crash and have been struggling to regain lost ground ever since. Quadtel attributes the stock slip to the delay of broadband rollouts in Australia.
Orrock maintains the acquisition will not result in staff cuts, except perhaps as a result of natural attrition.
"From our perspective there will be no retrenchments. In fact, we are currently looking for three people," he said.
Photograph: Former Marketing Results managing director Rod Orrock