Westcon CEO Tom Dolan has ruled out an initial public offering (IPO) while the group focuses on improving the profitability of its European operations.
"The current performance excludes an IPO right now," Dolan said in Sandton this morning. "When the performance improves we will look at the market and consider the possibility of an IPO at that time."
There had been speculation that Westcon, which has twice aborted a Nasdaq listing process, was again in talks with Nasdaq.
Westcon`s European operations have been a drag on the financial results of parent Datatec in recent years.
Part of the reason for that was the acquisition of the Landis networking distribution business in 2002. Dolan says Landis`s business model was confused, and the group has had to "take a sharp knife to it to make it more competitive".
He says it is now a smaller company, having exited several countries, but is more profitable and has in fact exceeded budget expectations.
Asked whether the Landis purchase was a mistake, Dolan said the group needed to move into more countries and the Landis buy did that quickly, although it could not foresee the liability that Landis would create.
"We were under time pressure through Cisco wanting to cut down on the number of distributors," he said. "That was something that was on the table at the time."
Thin offices
Westcon has taken an aggressive approach to turning its European operations around.
The group has formally exited Norway, Austria and Ireland, although it is looking to return to those markets through a different office model.
"There was a lot of expansion over the years, particularly through acquisition," he said, adding that while the group would like to continue to expand particularly into Latin America and Eastern Europe.
However, Westcon is "aware of the risks in these markets", he says. The group is planning to set up "thin offices", which are satellite branches rather than major offices.
There have been extensive management changes throughout the organisation, including the appointment of senior staff to drive the turnaround process. Some of the operations have also been cut down to focus on the strongest competitive opportunities, with staff cuts in France, Spain, Sweden, Germany and the UK.
Comstor Europe - the division that distributes Cisco products - is to focus on the more secure higher end of the market. There is still some uncertainty around changes in Cisco`s distribution philosophy in Europe, and Dolan says the new Cisco programs to improve the distributor margin are too new to project into the business model.
Westcon Europe has in essence been reformed as a smaller distributor, targeted at the voice convergence market, he says.
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