IBM’s purchase of Logical CSI may have saved the systems integrator from going under a second time, according to financial statements released late last month.
Logical CSI’s annual report for the year to February 29 says that the company was struggling to pay its debts without funding from its parent company, UK-based Logicalis, and was likely to stop trading without such backing.
Logicalis had agreed to pay creditors for another year but any support thereafter would be limited to $3 million.
The UK company also owns Logical Networks but has kept the pair separate since purchasing part of CSI, which went into voluntary liquidation in November 2002 in advance of IBM placing a court order for unpaid bills.
IBM announced on March 29 this year its acquisition of the two companies as part of a $US65 million ($100 million) buy-out of Logicalis’s New Zealand and Australia operations.
In a letter to the Logical CSI directors, Logicalis chief executive Jens Montanana outlined his plan to help the company “meet its liabilities”.
And in the audit report, accountants Deloittes’s say: “If financial support is withdrawn, the company may be unable to continue in operational existence for the foreseeable future.”
Deloitte’s suggested that if this was the case, then Logical CSI may have to sell assets for less than what they were valued.
“In addition, the company may have to provide for further liabilities that might arise, and to reclassify non-current assets and liabilities as current assets and liabilities,” Deloitte’s says.
But it appears Logicalis’s offer of help to Logical CSI is academic, because IBM has bought both it and Logical Networks outright.
Logical CSI’s current debts doubled to $5.3 million from $2.7 million in 2003, with an almost threefold increase in trade creditors.
The company recorded a $1.6 million deficit for the year. Logical Networks, which accounted for 82% of the two companies’ combined revenue of $69 million, recorded a $0.8 million deficit in for the 12 months to February 29, compared to a $927,000 surplus for the previous 11 months.
IBM spokesperson Reuben Young says IBM was aware of Logical CSI’s financial troubles and did not pay too much for the company.
“IBM is happy with the terms of the acquisition,” he says in a written statement. “We acquired Logical CSI for its skills in network services, particularly in next generation technologies such as voice over IP (internet protocol).”
The Logical brand will disappear in June. IBM told Reseller News on April 16 that it does not expect any redundancies — other than in administration — from the two companies.
Logical’s managing direct Murray Jurgeleit did not return Reseller News’s call at the time of going to press. He told the New Zealand Herald at the time of CSI’s November 2002 liquidation that it would be “quite dangerous if CSI went belly up”.