Dataflow sinks

After a tumultuous 12 months, Dataflow Computer Services hasplunged into receivership and faces an uncertain future, as accountants from Arthur Andersen pick through the debris.

A press statement from Arthur Andersen last week confirmed what many had feared was inevitable after Microsoft pulled the plug on the company in a distribution consolidation last year. Although not the sole cause of its downfall, sources close to Dataflow suggested at the time that the lost MS distributorship had stripped Dataflow of close to 60 per cent of its revenues. This was rapidly followed by a series of other mishaps which pushed the former edutainment software mainstay off course.

The news is a shock for resellers who have dealt with the company for over 17 years. In particular, it has forced the hand of e-tail startup smartbuy.com.au, which was relying on Dataflow as a fulfilment partner. With its warehouse and fulfilment plans in tatters, the race is on to find a replacement for what was a crucial component of the company's business model.

Tony Gattari, smartbuy's general manager, said the company has been in discussions with four other distributors for third-party fulfilment. "We are currently in the process of finalising our distribution arrangements," Gattari said. Both Dataflow and smartbuy.com.au share common investors in Allco Finance Group, Hambro Grantham and Brait Capital.

Peter Geer, national computer buying manager for Myer/Grace Bros, said the demise of Dataflow came as no surprise and it won't affect its puchasing. "[Dataflow] wasn't supplying us much over the last 12 months," Geer said. "We found we were using them less and less as they were struggling to reach our fulfilment requirements. We have our own fulfilment infrstaructure and it is always our preference to deal directly with vendors."

Dr Jeffrey Tobias, founder, chairman and CEO of Dataflow, reflected on the plight of the company he founded in 1983 in one room of a clothing factory.

"What has happened to this independent, Australian-owned company which I built from scratch to sales of $89 million in 1999 distresses me deeply," Tobias said. "Over the last 17 years Dataflow grew to become a well-respected and trusted name in the education marketplace. I doubt there would be a single school in Australia without Dataflow software on its computers.

"Over the years, Dataflow has provided career opportunities for hundreds of young Australians, and building relationships with our team members as well as with our suppliers and our customers is what I have most valued and enjoyed".

Dataflow's statement said the company had suffered some critical blows in the last six months, including a botched ERP implementation and the "surprise departure" of entertainment supplier Activision in April. This proved to be the "final blow", as it left Dataflow "with inventory totalling almost $3 million and little or no opportunity to realise the full value of this stock", the statement said.

Faltering customer service resulting from the company's shift to new premises also "somewhat rattled the channel", according to the statement. Meanwhile, "negative press" about the fact that Dataflow and smartbuy.com.au had common investors and directors further eroded the confidence resellers held in Dataflow.

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