More gloom as Commsoft's optimism takes a dive

By PETER GRIFFIN technology writer

It was more bad news for the country's small IT businesses yesterday as telecom software company Commsoft, listed on the ASX and NZSE, warned it would lose $A17 million ($21.4 million) in the year to June. This contrasts with the $A6.6 million pre-tax profit Commsoft optimistically predicted in last year's prospectus.

But Auckland-based Commsoft, which largely deals in software to monitor telephone and internet usage, has slashed costs, trimming staff numbers by a third to 80 and closing offices in Brisbane and Perth.

A sweeping review has also reduced net operating costs from $A1.2 million a month in the period leading up to April to $A300,000 for June says the company, which expects to achieve positive cash flows within two months.

Mark Lunt, Commsoft's recently appointed managing director, said the higher loss was largely due to an unexpected slowing in the sell through of products, particularly in the British market.

A write-down of the company's intangible assets was possible.

Commsoft is involved in a dispute with one of its largest Australian NetMaster distributors, and has vowed to take a harder line on outstanding bills.

"A number of the company's key resellers have been hit by a reduction in spending by their customers," said Mr Lunt. "We've tightened up the payment terms. We've got a new set of reseller agreements with very unambiguous payment terms."

Commsoft's woes seem to mirror those of equipment supplier Telemedia, which this month went into receivership owed millions in unpaid invoices.

And while its most successful product - the customer relationship management (CRM) software Brains - has been sold to several clients including Toyota and farming portal RD1.com, Commsoft sales have been slow this year.

Mr Lunt said the likely merger of RD1.com with rival fencepost.com could open up further opportunities for Brains in the dairy sector.

The Commsoft forecast comes as New Zealand's cluster of listed IT companies are weathering stagnant share prices and a cautious investment climate.

On Friday, internet kiosk operator E-Phone told the Stock Exchange that it would transfer its principal business activities to Australia after posting a loss of $8.49 million, on sales revenue of $1.658 million.

And tech investor IT Capital reported a loss of just under $5 million, mostly from a writedown of its investment in Terabyte.