Will cutting senior management and 30% of the workforce be enough for Commander to survive?
The recent travails of Commander Australia are a lesson for all managers and business owners in technology industries.
When Commander were floated in January 2000 they had a wonderful position in the market with over 100,000 small business customers and being the name for small business communications systems. No competitor could come close to them.
So how did they manage to get themselves into a position where their stock price has dropped 80% in six months?
The first point was they became greedy; as the former small business arm of Telstra they tried to overcharge for the older systems many of those 100,000 customers had. So clients went elsewhere.
Faced with a declining market share they decided to look to new markets rather than examine why their core business was shrinking; they went on a bank funded acquisition spree.
Like many managers in the technology sector, the managers of Commander didn’t understand their own market. Nothing shows this better than the references to computer hardware in their announcement to the ASX.
In the ASX presentation they blame in part the “low margin” hardware business. This of course begs the question as to why they were there in the first place.
It’s no secret margins are awful in the white box business. Unless you have a very good business model you can’t survive in it and it’s questionable whether CDR had a model at all.
The lesson from Commander’s demise is that the technology sector is a tough market and to survive it takes tough management who understand that market.Too many businesses, like Commander, think a few acquisitions can grow their business into markets they don’t understand.
In Commander’s case they went into the IT hardware and enterprise support markets. These markets are as different as chalk and cheese to each other and totally outside Commander’s core telecoms business.
Personally, I think Commander is doomed. The brand name is tarnished and there are thousands of more nimble, better run competitors. It’s certain many of those competitors have learned from Commander’s mistakes.