Wanted: a white knight keen on distribution

It was probably obvious from the Landis management team's reticence over Westcon's decision to end acquisition talks last week...

It was probably obvious from the Landis management team's reticence over Westcon's decision to end acquisition talks last week that something was seriously amiss at the company.

Now, just one week after Westcon delivered its body blow, the full extent of the crisis at Landis has been revealed.

Although full details of the situation are still emerging, it seems clear Landis has launched a last-ditch attempt to deal with mounting debts at the same time as working out a way to keep its plan of turning itself into a services group alive.

But first the facts, as presented by Landis on its Web site:
  • The company has offered some of its creditors a settlement which it claims "should result in the restructuring of [the creditors'] debtor balances."
  • Landis has admitted that - should no white knight appear to take on the distribution business - it will be "downsized" and the resulting "proceeds from debtors and stock" will "contribute to the shareholders equity of Landis". Or in other words, proceeds from any creditor deal will be used to prop up the remaining services arm.
  • The remaining Landis business will be developed into a "full services provider" - which was the company's initial plan up to two weeks ago - with "additional core competencies" covering "professional services, application services, educational services and the sale of ICT infrastructure products".


An April Fool?
Justifying the ambitious - and some have argued unfeasible -plan, Landis says it is looking to cost savings to make it work.

"These activities were profitable in the past. Improved profitability is expected through cost reduction and the opportunity to put more focus on these core competencies," the statement says.

It adds that Landis "is confident these measures will lead to the company being a full service provider that will successfully operate in six European countries in the field of systems integration".

The final point here - Landis' intention to operate in six countries - begs a number of questions given that it operates in ten at the moment.

In addition to the limited official comment from Landis, the channel has been buzzing with news from Landis' vendor partners contacted by the company about its creditor settlement proposal.

Most important here are the details of the deal, which MicroScope has learned will see suppliers receive as little as 25 pence in the pound.

As well as the small return, creditors were told the proposal had to receive almost unanimous backing from 90 per cent of them by 29 March (Good Friday) - two days after the letter was supposedly issued (and a bank holiday in most European countries).

As one industry source put it, if the letter to creditors hadn't been dated 26 March, the recipients would have believed it was an April Fool's prank.

Conspiracy theory
So what are we to make of it? As much of the industry was either stunned into silence or - like most of the Landis vendor roster contacted by MicroScope - tight-lipped over a potentially damaging situation which could lead to serious stock write-offs, a number of questions have to be answered.

Is the fall of Landis' product distribution business just another chapter in the depressing yet inevitable process of consolidation taking place in a channel moving more and more towards the domination of two or three broadline giants?

Conspiracy theorists might wonder whether Landis is proposing a creditor settlement requiring almost unanimous support within a 36-hour timeframe as a way of guaranteeing the plan will fail.

They question whether the plan has been drawn up because a suitor is waiting in the wings to acquire the company for a bargain price from administrators rather than paying the full amount.

No one will know until the dust clears.

One thing is certain. When the chapter closes on the troubled recent history of Landis, the European networking channel will be a different place and a number of vendors will have learned another painful lesson.
This was last published in April 2002

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