Tennyson scrambles to rescue Datareach staff

By PETER GRIFFIN

The fate of 25 IT workers at the Datareach development centre in Napier will become clear in the next few days as the company's Australian owners race to put a rescue funding package together.

Tennyson Networks, the Melbourne owner of Datareach, was left in the lurch last week when its investment partner, Neoside, cut off funds to the company amid its own difficulties.

PricewaterhouseCooper is now administering Tennyson and last week was forced to lay off all Australian staff, numbering 22.

Meanwhile, Datareach, which develops fast internet digital subscriber line (DSL) equipment primarily for the Polish market, trades on as normal but will soon face a cash crunch if Tennyson fails to secure further funding.

"There's risk that if the Neoside transaction doesn't happen in the short term Datareach may face insolvency," says PricewaterhouseCooper's Nick Brook.

As Tennyson's shares on the Australian Stock Exchange remain suspended it is becoming clear that Datareach's previous owner, Ericsson, may have had impeccable timing in offloading its Napier unit, which was sold for an undisclosed amount.

Brook said Datareach was cashflow neutral but that its "order book is lumpy", with an unpredictable flow of revenue coming from operations.

Specialising in fast internet equipment for copper lines subject to interference, Ericsson originally developed the technology for Telecom, but the operator then settled on rival equipment.

The unit, then named Ericsson Data Services, was restricted to doing business in Poland so as not to compete with similar products from Ericsson.

"As this issue is in the hands of the administrators we are not able to comment," an Ericsson spokeswoman said.

Neoside had a plan in place to supply nearly A$10 million to Tennyson in return for a 70 per cent stake. It had an agreement to supply Tennyson with up to A$2 million in bridging loans in the meantime but had been unable to do so.

Tennyson's directors are confident the deal could be saved. Creditors are owed around A$3 million ($3.5 million), including long- and short-term debt.