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Commander Chairman's Mea Culpa |
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Written by Adam Gosling
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Friday, 30 November 2007 |
Commander Communications Chairman Elizabeth Nosworthy has issued a Mea Culpa that apologises for the company's disastrous start to the fiscal year and seems to close off the possibility of a sale.
Admitting that it has been an extremely disappointing year for
Commander shareholders, Nosworthy claims the current share price is
completely unsatisfactory.
Shares in the company have fallen to record lows in the second half of
this calendar year with most institutional investors continuing to rid
themselves of the company stock throughout November.
After hitting a
high of $2.29 in the past 12 months shares have recently hit a low of
$0.24 wiping almost 90 per cent off shareholder investments in around 9
months.
While admitting that Commander has faced a number of "genuinely difficult issues", Nosworthy
seems intent on shifting at least part of the blame for the company's
disastrous market position on "rumours and ill-informed speculation"
that the company was in crisis.
While we doubt she is referring
to anything VoIP News has written, a company in the process of
digesting a hostile takeover, that loses 90 per cent of its market
value in under a year, is unable to process sales orders, is unable to
execute a core strategic franchise deployment and unable to finalise
its financial results and is unable to sell itself for a decent price, is, in fact in
crisis, even if it has a sound business.
It is clear from Nosworthy's Mea Culpa
that the management and executive of the company had bitten off more
than they could chew trying to integrate the Volante acquisition while
also trying to roll-out the strategic franchise model.
"In the run-up to the end of the financial year we were continuing to record outstanding sales growth," says Notsworthy..
"However it appears that the extra sales over stressed our transaction
processing system and we suffered major systems malfunctions toward the
end of the financial year."
Commander was migrating its entire
business over to the Volante transaction system which no doubt caused
the blow out, but remain mindful that this is a systems integration
company we are talking about. One that asks other organisations to
place their trust in its technical skills.
"By the time the
systems issues were identified and rectified, many of the year end
sales had been lost as customers needing to place orders by year end
had gone elsewhere," she says.
To
rectify the mess, Nosworthy says the board has engaged, BearingPoint to
undertake an independent review of the company's systems, PMMS
Consulting Group and Expense Reduction Analysts to review costs and
margins and PPB Chartered Accountants to examine the company's cash
management processes.
In
addition the Board decided it should conduct a "broad strategic review"
and to "consider recapitalisation options" to reduce debt levels and
engaged ABNAMRO to advise. Subsequently opening a data room to allow
potential investors to obtain information about the company.
"Priority
was given at this stage to approaches which might have resulted in a
full takeover or the introduction of a cornerstone investor," saysNosworthy.
The
borrowings made to acquire Volante have left Commander "highly geared
at present" and Nosworthy admits it is "desirable and in the interest
of shareholders that we pay down some of the debt funding." Nosworthy
denies that the decision to seek an external sale of cornerstone
investor was "not a 'fire sale' of the business" and no such deal was
struck.
Next in her address to shareholders, Nosworthy
notes that the company's senior management "must also accept that they
have made errors in executing the company's business strategy". It
seems that while none of these managers will receive a bonus this year,
they will keep their jobs in the short term.
"It is the Board's
view that over time we must add to management strength by bringing new
talent into the company. However, our existing management have strong
and durable relationships with out customers and we will not be making
changes at a pace that damages the company's relation ships and
prospects," is a statement that must make for some uncomfortable watercooler discussions.
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