Memorex Telex NV has reinvented itself as a provider of networking and storage integration skills. The change in business strategy is part of the company’s climb back from crippling debt and two sessions in the bankruputcy courts under Chapter 11 protection. And if the change in strategy is successful, the company believes it will be able to further reduce its current $100m debt to $72m sometime in 1995 via working capital financing. Irving, Texas-based Memorex Telex says it has been developing this new business strategy over the last 18 to 20 months but decided not to launch its new services officially until they were up and running. It says the change has been prompted by three factors: the arrival in 1992 of chief executive Marcelo Gumucio; customer demand; and the restructuring of the company’s debt that led to a scrutiny of areas that would be profitable. The areas uncovered were those that would take advantage of Memorex Telex’ experience in enterprise networking and storage. For Memorex, with its established base of staff, the shift to a solutions provider for corporations moving away from solely the mainframe to desktop systems connected via local and wide area networks, has meant that although turnover is down, profits are up, in the UK at least, and it claims that few companies, if any, can deliver the enterprise-wide offerings it can. A Professional Services Division will spearhead the new business; it is divided into four groups, network services, implementation services, training and environmental services.
Dying mainframe market
Network services will offer design, modelling, audit, integration, migration, cabling, network management, help desks, cable management centres, operations and voice and data integration. Memorex Telex is also planning a European Network Control Centre for remote network services modelled on the Tulsa, Oklahoma one. Implementation services will offer project management, installation roll out, preconfigured stock, training, help desk and multi vendor maintenance. Environmental services cover computer room building design, power protection, power cabling, business protection and insurance services. Memorex Telex is also strengthening its direct sales force, value added services and partnerships with companies such as Intel Corp, Fujitsu Ltd, Novell Inc, Data General Corp and Electronic Data Systems Corp. It has just been appointed as a Novell Authorised Education Centre. The change in focus means that Memorex now manufactures very little. It is still making fixed function terminals but personal computer manufacture has been outsourced to Intel and its storage products are made by Fujitsu Ltd, a relationship that Memorex has had since the 1960s. The company still assembles some products on which it holds the patents and adds value to others. Memorex Telex emerged from Chapter 11 bankruptcy on March 24 when new securities were issued in exchange for debt and equity securities currently outstanding (CI No 2,375). The plan effectively disenfranchised the people that took equity in place of the money owed to them in Memorex’s last bankruptcy proceedings two years ago but it had support from sufficient creditors to push through the plan. At that time the consolidated assets of all company’s affiliates was $1,040m and liabilities $1,340m. The plan eliminated about $591m of senior notes plus interest and $230m of bank debt through their conversion to equity. The plan converted $850m of debt into equity, leaving around $100m of debt currently carried. The holders of equity from the 1992 reorganisation received warrants that if exercised would give them a stake of about 4% in the firm (CI No 2,354). This August the company reported first quarter net losses of $30.6m, after write-off of goodwill of $31.3m (CI No 2,472). Memorex Telex ended up in such trouble because of the dying mainframe market and the 1987 takeover of 3270 king Telex Corp.
