The developments of the last week at US software company Peregrine Systems are not expected to have a material effect on the business of MGX Solutions, the hardware and software delivery arm of JSE Securities Exchange-listed MGX Holdings. This is the report from MGX Solutions CEO Dan McMahon, who says Peregrine`s decline is regrettable but it does not leave his company significantly exposed.
"We have been closely associated with Peregrine over the last four years, as the distributor for the company`s products," says McMahon, "and as such it`s reasonable to expect that Peregrine`s collapse would affect us materially. However, this is not the case, and we are covered on most fronts." This week Peregrine announced:
* It had filed for Chapter 11 bankruptcy protection.
* It had sold its Remedy business unit to systems management giant BMC: it acquired Remedy in August 2001.
* It was suing Andersen for incorrectly audited financial reports: the company`s 2001 figures had a $250 million discrepancy.
"As we are the Master Distributor for BMC in SA, we should have ongoing access to both Peregrine and Remedy products, and as such we can provide ongoing sales and support to existing and prospective customers," says McMahon. "We are in negotiations with all parties to prevent disruption of product supply and support."
Peregrine invested earlier this year in parent company MGX Holdings, providing a cash injection of some R140 million to the balance sheet. This was a particularly healthy and profitable transaction for MGX, adds McMahon, as it gave the group financial impetus at no risk: for instance, MGX Solutions has no short-term purchase obligations in terms of Peregrine licences.
BMC is the second largest systems management company in the world, with revenues exceeding $1 billion a year. It has acquired Remedy for $350 million, which will assist Peregrine in settling its financial affairs. MGX has been the Master Distributor locally for more than 18 months.
"Remedy is the absolute leader in the helpdesk space; Peregrine had become the leader in the infrastructure management market; and BMC is an unquestioned leader in systems management," concludes McMahon. "Customers couldn`t be in better hands in terms of current and future delivery."
BMC will pay $100 million to Peregrine with immediate effect. This will help the company settle its short-term commitments. "It`s important to note that Peregrine is not bankrupt, but is using Chapter 11 as a legal process to deal with is debt restructure," says Allen Lewis, Peregrine product manager at MGX Solutions. "Operations are ongoing as per normal at Peregrine: staff will be paid, product development will continue, and Peregrine will execute its two-year roadmap as announced earlier this year.
"Many companies have emerged from Chapter 11 the stronger for the experience," Lewis adds. "They include Texaco, 7-Eleven and Toys-R-Us, to name a few. Peregrine is confident it will join this list of Chapter 11 survivors."
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