In another of a series of restructuring efforts this year, distributor GB Micro announced earlier this week it will take steps to protect itself from creditors.
President of Montreal-based GB Micro Solange Dugas Baizer said the company had filed its notice of intention on Monday and is working on a proposal for creditor protection. The proposal will cover how much debt GB Micro can afford to repay its suppliers and customers.
“Nobody likes to lose money, however the idea is for them to recover as much as possible,” said Baizer. “It’s unfortunate, but it happens in life. Given the state of the industry, sales are not so easy to come by. I’ve been in business 18 years. I’ve lost tons of money myself. I know how it feels.
“We’re telling our customers that we’re staying in business. We’ve done a lot of restructuring,” said Baizer, referencing the September closing of its Toronto and Vancouver offices due in large part to a considerable decline in the DRAM market. Last Friday, seven people were cut from GB Micro’s surviving Montreal office, bringing the total headcount down to approximately 25.
Recent restructuring has resulted in GB Micro dropping a number of its product lines, including motherboards and its signature line of white boxes. The company’s list of inventory on its Web site has been severely depleted.
“As the situation stabilizes, we’ll look carefully at certain products that we’re not carrying now that we’ll maybe start again. Since we’ve been a memory house, first and foremost, for all of these years, we’re concentrating on that,” said Baizer.
As a result of GB Micro’s shift in product focus, Creative Labs has ceased doing business with the distributor. “When they changed their business model, we walked away and parted friends,” said Creative Labs Canada director Mark Jamieson. The hardware vendor has since increased its business with other Canadian distributors such as Ingram Micro and Tech Data.
Jamieson isn’t aware of any outstanding funds owed to Creative Labs Canada, noting that the company did most of its business with GB Micro through other channel partners.
A cocktail of management style, difficult marketing conditions and competition from other distributors probably led to GB Micro’s fiscal woes, said Evans Research Corp. analyst Michelle Warren, but the decisions the company has made with product lines and office restructuring may give GB Micro a fighting chance.
“They have to make up for lost relationships, lost people; they have to be careful of the bottom line. They’re obviously losing money. My guess is that they can survive, but it’s an uphill battle,” said Warren.
Memory product vendor Kingston Technology Co.will continue to do business with the troubled distributor but will proceed cautiously, according to David Kuo, general manager for Canada.
“We are certainly doing business with them, but obviously we had to take some measures . . . in order to protect Kingston. This is something mutually agreeable to both GB Micro and Kingston,” said Kuo.
Baizer said a number of her suppliers have asked to conduct business through COD. Kuo wouldn’t specify if Kingston was among them but commented, “We have to watch out for our exposure.”
Kingston has reduced the amount of business it is conducting with GB Micro and has fallen back on its other distributor partners to pick up the slack, said Kuo.
Baizer is confident many of her other suppliers and customers will stay with GB Micro through its financial difficulties, saying the company’s 18-year history should be taken into account.
“You can be angry and say, ‘I don’t want to do business with them anymore.’ That’s one choice, but if you see that people are doing there best, then we can recover some or all of your money,” said Baizer.