Top UK Fujitsu exec Michael Keegan has warned that Michel Dell's recent leveraged buyout of his company may lead to Dell suffering the same fate as fallen service provider 2e2.
A zombie company is weighed down by debt on its balance sheet; they don't have any profits they can re-invest in the channel, into its R&D all the profits go to pay the people they borrowed the money from to buy the company. It's like being mortgaged to the hilt.
Referring to 2e2's bankruptcy earlier this year, Keegan commented: "They went bust because they took on too much debt and they couldn't meet their interest re-payments on the debt. Michael Dell is now playing that game. He's a brave guy."
Speaking to IT Pro's sister title Channel Pro at the Fujitsu Forum in Munich this week, Keegan added: "There are so many companies that have done this a leveraged buyout and it has not worked, and they've become a zombie' company. A zombie company is weighed down by debt on its balance sheet; they don't have any profits they can re-invest in the channel, into its R&D all the profits go to pay the people they borrowed the money from to buy the company. It's like being mortgaged to the hilt."
The executive director of Fujitsu's Technology Product Group at Fujitsu UK and Ireland also scoffed at Michael Dell's recent appearance at Dell's Tech Camp in Paris, where he said that no longer answering to shareholders will allows Dell more freedom to build its enterprise business, with increased investment in R&D.
"It's the freedom you have when you're 100 per cent mortgaged," said Keegan. "The truth of it is, they have $22bn of re-financing; most of it is debt. Why did he come? He came because he needs to reassure everybody the business is still there."
Keegan continued: "He's bought businesses that could bring margin, but the truth of the matter is they haven't really been integrated well. This is a classic problem with companies. When you get famous for one thing, and you know who to do that very well, then the game changesit's a big job to show you can move your business model [from PCs] to do the new stuff to take you forward. I think the problem they've got, is that they are, at their heart, a PC company. When you boil it all down, that's their problem."
Speaking of Fujitsu's own growth, he said the year-on-year the vendor was posting overall low single digit revenue growth, which he was "really happy about." He said: "In a market that's seeing the desktop market decline, the PC business decline, flat on server and low single digit growth on storage, growing the UK & Ireland in Fujitsu is a strong powerful message."
Keegan also said the firm's UK channel is now double the size of its direct business the opposite of just three years ago.
"We've definitely got out channel proposition right, now. Three years ago we were going to market in entirely the wrong way, but we've found out what works, listen more rather than spoke, and got ourselves educated. Now I think we're serving ourselves up the channel in a way that's going to lead to success."
This article was originally published on IT Pro's sister title Channel Pro.
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