Bradford, Yorkshire-based computer peripherals supplier Microvitec Plc, which yesterday posted interim net losses of over UKP2m on sales that tumbled by nearly 40%, has firmed up radical recovery plans that will eventually see its ailing monitor and terminal businesses take a back seat to local area network and integrated services digital network equipment. To re-focus its old activities and make room for the new ones, Microvitec is to re-organise into three separate business areas – a monitor and terminals arm, a multimedia business and the new digital communications division – and will shed a further 20 staff as part of an on-going kick-up- the-pants operation supervised by new management. The plunge into the data communications market is clearly the brainchild of new chairman James Bailey, who was drafted in from Gandalf four months ago by Microvitec’s principal shareholder Chase Advance Technologies to turn the company around: Bailey justifies the move using the right place at the right time aphorism and believes that European standards bodies commitment to ISDN – a concept touted by more than its share of pundits but still largely unrealised in hard commercial terms – means that now is the right time to take the technology on board. But is Microvitec ready to step into the telecommunications arena? The new management may have experience in data and telecommunications – ex-Northern Telecom Europe vice-president Robert Adams has been brought in on the sales and marketing side, while Alan Spencer, former ISDN product line manager at Gandalf has been named chief engineer but Microvitec itself is in the position of having to buy in most of the technology and expertise from outside. Accordingly, Bailey says he is a week away from securing a deal to buy a small Canadian Ethernet and Token Ring local area network company – a business he describes as an Aladdin’s cave of opportunities – and expects to announce a deal next month with another Canadian communications firm that will give Microvitec OEM rights to its product range outside Canada. Microvitec is planning to bring out in-house-developed products, including a local net bridge for personal computers and ISDN applications, around April of next year. The new-born digital comunications division, which will handle these products and a range of V Spec modems, bridges and routers, is to be based across the Pennines somewhere in the North West – most likely in Chester, where many of the new recruits come from. The rest of Bailey’s efforts will be spent in building up the stagnating US arm in the belief that a presence in the US market is crucial for the group as a whole. In what increasingly looks like a colonisation of Microvitec by ex-Gandalf staff, Bailey has appointed Alan Melkerson, another of his old colleagues, as vice-president of sales and marketing at Microvitec Inc. The multi-media arm, meanwhile, will be kept on as a wait-and-see business: Bailey reckons multi-media will take off, but wouldn’t like to say when; if the wait turns out to be too long and not worth the trouble, then it will be jettisoned.
Current problems
If it does take off, Microvitec will draw on its pact with Boston-based Processor Science Inc for exclusive manufacturing and marketing rights to the US firm’s interactive video-audio card. But so much for tomorrow’s plans: Microvitec’s current problems come largely from the failure of two large OEM deals with Reuters and British Telecommunications: the troubled Reuters decided to switch to a cheaper Japanese monitor maker, while British Telecom has been too engrossed in its own reorganisation to make any positive contributions to the Microvitec account. Still not fully convinced of the benefits of direct selling, Microvitec has added another four UK and European OEM deals; talks are still going on with French distribution firm Infoco, in which it has a 33% stake, and which has not been doing much trade in Microvitec products: the choice for Microvitec here is either to take up its option to buy the rest of Infoco and commit it fully to Mic
rovitec products, or sell up completely – given Bailey’s ambition to have at least 50% of revenues outside the UK, this last course of action would presumably be followed by the formation of a France-based Microvitec SA arm. As mentioned above, the 65 job cuts instigated by Bailey a few months ago, largely targeted at what he contemptuously describes as an unnecessary layer of low-level statisticians, will be followed by around 20 more cuts – pruning – that will make Microvitec 20% smaller than under the old management. Another area pin-pointed for cost reductions is the buying of components: from now on, Bailey says the policy is to use manufacturers as opposed to dealers wherever possible and concentrate on building just a few long-term deals. The all-new Microvitec expects to trade profitably in the next half, although not enough to wipe out yesterday’s first half losses, which brought its share price down three pence from 24 pence ahead of the announcement. Despite the big plans, Bailey stresses that the first priority will be simply to get Microvitec firmly back in the black.
