PC Company calls in the receivers

By PETER GRIFFIN

Hopes of saving local computer maker The PC Company from extinction are slim, with management calling in receivers after failing to clinch a rescue deal with investors.

It now seems likely the PC empire built up by entrepreneur Colin Brown will be dismantled and sold off to pay debts and severance packages for the 70 staff.

Staff were sent home last week as the company shut its doors and wound down assembly at its Hamilton factory, which at its peak churned out up to 2000 PCs a month.

"We don't believe we've any other option but to negotiate receivers to come in, which is pretty distressing after 22 years," Brown said last night.

He had taken part in intensive negotiations with "several parties" last week trying to forge a deal that would inject capital into the company and allow it to resume trading. Nothing came of those talks.

The ANZ bank has extended a substantial banking facility to the company and is the first debenture holder. Brown said he was trying to raise a personal loan to repay ANZ so he could appoint his own receiver.

"The reason to do that is to keep receivership costs as low as possible and maximise any return.

"It's product that could be sold off pretty cheaply if people don't know how to dispose of it in the correct way."

If Brown is able to raise the money to pay out the ANZ he could become the first debenture holder and therefore be first in line for any payout.

Among The PC Company's creditors are IT distributor Ingram Micro, which said last week that it was owed "hundreds of thousands of dollars", IT distributor Tech Pacific, Carter Holt Harvey, Esanda Fleet Partners and Leasing Solutions.

Brown declined to say exactly how much was owed to creditors.

"I've always said it was less than a month's turnover, it's not an excessive amount in relative terms."

Peter Shirley, executive director of Arche Technologies, now the country's biggest local assembler, said he was not interested in The PC Company's assets, which include the assembly line in the Hamilton factory, inventory and shop leases.

As chairman of the Computer Manufacturers' Association, Shirley was anxious to know whether the body's industry fund for guaranteeing customer warranties of contributing companies would have to be tapped into. The association this year capped the fund as it had grown to several hundred thousand dollars.

"If The PC Company is going to chew up a fair amount of that we may have to reconsider [the cap]."

Sales at the PC Company had been declining over the past year, making it hard to justify the retail presence of seven stores and the manufacturing capacity in Hamilton.

But Brown had been reluctant to radically change the business model because he was in the middle of negotiations with a national retailer to begin supplying it with PCs in relatively high volumes.

That looming deal was snuffed out last week when the retailer, understood to be The Warehouse, re-evaluated its strategy for selling PCs.

"We couldn't change the model too much while we waited for this thing to happen," said Brown.

Shirley said The PC Company had built its business on good sales to the home market but had started targeting business users too late, a fact Brown freely admits.

"The only market that hasn't really grown has been the consumer desktop segment and in hindsight that's where we had too much of our business," he said, pointing to figures from analyst group IDC.

For the quarter ended June 30, year on year growth in the consumer desktop market was just 3.6 per cent. Other market segments, such as portables, servers and commercial desktops were registering steep growth.

"The area we needed to concentrate on more was business to business, people who want local support and a good smart company to look after them," said Brown.

He denied speculation that he intended to wind up The PC Company and start afresh with a smaller operation based in Hamilton.

A recruitment company was trying to find work for former employees. Six Hamilton workers had already found new jobs.

Brown has faced financial ruin in the past, notably in 1998 when a partnership with Auckland PC retailer Best Buy went sour, leaving him $450,000 out of profit.

The company, then known as Pegasus, was able to trade out of that crisis.

This time around, Brown and his wife, Keryn, who own The PC Company, stand to lose the money they invested.

In the meantime, their priority was to wind down the business fairly to all parties.

"At the end of the day," said Brown, Keryn and I still have to look at ourselves in the mirror."