Layoffs loom at SolNet

Almost a week on from Sun and SolNet's divorce, SolNet management are putting a brave face on the company's financial position.

Almost a week on from Sun and SolNet's divorce, SolNet management are putting a brave face on the company's financial position.

The future of Wellington-based SolNet has been thrown into disarray with the cancellation last week of its supply agreement with Sun.

SolNet chairman Murray McNae and managing director Mark Botherway are positive about the company’s finances. But questions surround its ability to settle a debt to Sun, thought to total several million dollars.

Sun Australasia managing director Jim Hassell (pictured) abruptly ended the 10-year relationship Sun has had with SolNet last week, citing “financial reasons”. Hassell told Computerworld Online last Tuesday that the company had filed a demand for payment of money owed by SolNet, but he wouldn’t disclose the amount.

McNae says the move came as a surprise as the parties continued to negotiate terms of a new supply agreement which came into effect on July 1. From that date SolNet ceased to be a sales agent, becoming a Sun reseller.

Both parties are expressing disappointment.

“We’re extremely disappointed and sad to be in this circumstance after a long and successful relationship,” says Hassell.

“The disappointment for us was the lack of consultation,” McNae says.

McNae and Botherway are pinning the company’s future on software development and services, but Sun product sales represent about 60% of its revenue. Botherway says the company has “reserves”, but won’t say whether they exceed debt.

“I’d rather not be drawn into that,” he says.

Nor would McNae go into detail on how much money SolNet owes Sun. However, he says the suggestion that it is as much as $10 milllion is “ridiculous”. He says there is always money owed between supplier and customer and that SolNet is trading profitably.

“It has good cashflow; it’s a sound business.”

A statutory demand for payment gives the debtor 30 days to settle. After that, a creditor can issue a winding up order.

McNae and Botherway acknowledge job losses are likely, but won’t say how many or by when they’ll occur.

“We’re working as quickly as we can through the implications,” Botherway says.

Both Sun and SolNet spent last week informing partners and customers of the changed circumstances.

The situation is likely to have little impact on The National Library, which recently bought a Sun Fire Server through SolNet, says Ray Norton, the library’s technical support manager.

“We always used to buy gear through SolNet, but Sun does the maintenance.”

Having said that, he notes that it is always disappointing to lose a vendor it’s had a strong relationship with. “But for us it will be business as usual.”

The library had no pending orders through SolNet when the split came. “But the main question I have at the moment is if I want to buy new equipment, where do I go? I know there are others, but we always had this arrangement with SolNet.”

Murray Young, general manager of development at ACC, says the organisation is still assessing what the impact of the split will be.

“We’ve always had a good relationship with Solnet. It always did a good job for us and we’re talking to both it and Sun.”

There is likely to be little immediate impact on ACC’s IT operations, Young says. “We’re not in a major procurement phase at the moment and don’t have any immediate concerns.”

ACC runs Sun Netra T1 and Sun Fire v880 servers for web and application services and Sun E10000s for its databases.

“We have significant investment in Sun gear, but the procurement we’re doing is maintenance, the odd bits and pieces we need. I’m confident the market will settle down buy the time we [do more procurement].”

ACC outsources most support to Unisys, but the maintenance agreements for the Sun hardware are with Sun itself, Young says.

Eagle Technology chief executive Gary Langford says the split was “extremely sudden”. As a Sun and former SolNet business partner, Eagle says it wants to minimise disruption in the Sun market in New Zealand, and is in discussions with Sun and SolNet “to make sure the customer base is protected”.

Eagle has provided customers with Sun gear bought through SolNet “and Sun is a very important part of our product set”.

Hassell says Sun will immediately hire five sales and pre-sales technical staff, eventually lifting that number to 10.

While concerned at the perception SolNet customers might have of the company being cut off at the knees by its supplier, Hassell says his bigger concern is the implication for customers.

“We haven’t set out to undermine a local company,” Hassell says.

A company which stands to benefit from SolNet’s loss is Computerland, which has been establishing an enterprise sales group since former SolNet executive John Hanna joined earlier this year. Computerland was an existing Sun reseller, and is now stepping up its efforts, but Hanna says there will be no “feeding frenzy” over SolNet customers.

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