The last year of th 20th Century begins with Elcom warning that sales and profit would be modest as the reseller looks to make the transition to becoming a total ecommerce and Internet player.
January: US reseller Elcom International set the tone for the forthcoming year, by waiting until the very last day of 1998 before it warned of below-par fourth-quarter forecasts, joining a long line of other US channel players who drove stocks down in their wake. Blaming the downturn on overall economic conditions within the corporate market, the reseller issues a statement anticipating sales of approximately $185 million during the fourth quarter, down approximately five per cent from the third quarter and substantially less than the company's fourth-quarter plan.
As part of an ongoing restructure of the reseller, 24 staff, or four per cent, are made redundant from its UK operation as its ecommerce unit merges with its Internet sales and technology subsidiary. The Elcom Systems unit is integrated into the elcom.com subsidiary, established on 31 December in the hope that an Internet-based model would result in lower costs.
May: Elcom's transition to an Internet-based reseller continues to take its toll as it sees a net loss of $1.5 million in the first quarter ended 31 March, against a net profit of $1.4 million in the previous first quarter. Sales are $174 million, a drop of 8.3 per cent from $190 million last time. Despite the restructuring, no related charges were declared in the quarter. Elcom claims it managed to reduce inventories in the three-month period to $24 million by the end of the quarter, from around $40 million as at 31 December 1998.
July: Elcom International sells two-thirds of it UK business - the UK reselling arm and its Elite Distribution subsidiary - to Specialist Computer Centres (SCC) for approximately £27.7 million. The sale, which marks Elcom's withdrawal from the corporate reseller business, and its final transition into an Internet reseller and ecommerce application service provider, takes place two years after the US reseller originally began its search for a buyer through partner Salomon Smith Barney, only to give up in September 1998. Elcom International admits it is likely to make a book loss on the sale.
Jim Rousou, chairman of Elcom UK, says the sales force would no longer target the top 1000 corporate customers after the deal with SCC parent SCH is sanctioned, but would continue to resell computer products to the middle-market, while Elcom transformed its business model. With Elcom focusing squarely on its online and Internet strategy, the UK sale to SCC strengthens the latter's presence in the south of the England, where around 300 staff, mainly with technical and services skills, are expected to move with the acquisition. While Elcom's UK distributor Elite merges into SCH's distribution arm, ETC, the AMA and Portable divisions of Elcom are not included in the sale.
August: Elcom UK joint managing directors Philip Garnar and Kevin Thackrah leave the reseller to set up Lamberhurst Consulting in Halstead, Kent. In addition, the SCC buyout leads to the departure of finance director Kevin Morrison, while Steven Smith, technical director, and Barbara Whitney, group director of enterprise and major business, both move to SCC.
December: The first phase of Elcom's relaunch as a virtual reseller begins in the form of a Web portal aimed at small and medium businesses. Elcom.co.uk, which is intended to be the first port of call for Elcom customers, is to be up and running before Christmas and officially launched in the new year. The portal will provide business news and features such as a Scoot business finder and a weather service and will also link into PECOS Web, the reseller's online sales tool.
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