Friday 16 November 2018

Eircom's net loss at Ebeon


TRY this for revenge. Last Tuesday, Eamon Dunphy, Tony Gregory TD and I served notice on five Eircom directors that we would seek their dismissal at the March EGM.

A day later at Eircom's board meeting, the five geniuses responded. Their answer was a trifle extreme. They closed down Ebeon, a 51 per cent Eircom-owned e-business.

One hundred and seventy people lost their jobs. Among them was my son and heir. Son he may well be; but he will not be heir to much if my family continues its unhappy association with Eircom.

First, the limited family capital has been decimated by our punt in Eircom at Euro C3.90; now his income has been cut off by Eircom. What a lightning response. I will think twice before I take up the cudgels against the five geniuses again! Put it down to the curse of Eircom.

The show must go on. The closure of Ebeon is a bit odd. How can a board of directors buy a company which was losing money hand over fist (like most Internet businesses) and close it down 20 months later because the well is running dry? Eircom either made a mad buy in May 1999, failed to exert proper control through its nominees on the board or simply does not understand the Internet business. Either way, heads should roll.

Ebeon never made money. According to reliable sources, its revenues were roaring ahead. Its products were excellent. Its clients were blue chip. It was preparing for a share flotation. Yet Eircom pulled the plug.

Is Eircom jinxed? Of all the high-tech companies in Ireland, how did it pick the first to go bust as its showpiece investment? The curse of Eircom strikes again.

Perhaps the decision was correct; but I wouldn't bank on the five geniuses Jim Flavin, Billy Attley, Dick Spring, Pat Molloy and Paul Mackay to know any more about the finer points of e-commerce integration than the same five clowns ever knew about telecoms.

Even by Eircom's extravagant standards, £21m down the tubes is a bit over the top. Our £21m. But it prompts the question: what other unorthodox investments has Eircom made with its rapidly dwindling war chest?

Ebeon was probably their biggest splurge. But they also own 20 per cent of Nua, an Internet consultancy in Dublin. Nua may soon lay off one third of its staff. Flexicom, a multi-currency card-processing company, is 30 per cent owned by Eircom. Its financial year ends next month and analysts are predicting disappointing figures. Among Eircom's other hotch-potch purchases is 30 per cent of Viasec which resells security products in Donegal. And far away from Donegal, they also threw £5m at a company called Onemade Inc, an online arts and crafts auctioneers in Boston, US.

What has the board been doing, almost unnoticed? The five geniuses have allowed Eircom to own a now bankrupt website design company, an arts and crafts auctioneer, a multi-currency processing outfit, an Internet consultancy and a Donegal group which resells security products. None of these companies appears to have anything in common. Eircom seems to have been buying any old operation with a high-tech profile indiscriminately and then hoping for the best.

In Ebeon's case, they handed over the money and left the management to their own devices. The Eircom board either lost their bottle or cut their losses. All the staff were laid off the day before they were due to receive their January cheque. Socialists Dick Spring and Billy Attley (both directors) approved of the closure at last week's board meeting.

Ebeon is just one more Eircom fiasco. And despite it having hit my family, it will rank as only a minor disaster in the Richter scale of the company's catastrophes. Much worse is the unravelling Vodafone deal. We are now looking at a value of only euro 1.76 per share. The original value of the sale of Eircell to Vodafone was euro 2.31 per Eircom share. We are now losing about 55 per share since the two-for-one swap was agreed. And the directors are sitting watching, their backsides stuck to their board seats. They didn't even manage to negotiate a cash alternative, a safety net.

Eamon Dunphy, Tony Gregory and I have no quarrel with Eircom's new finance director Peter Lynch. Alfie Kane should be allowed to remain for the moment, as he is incredibly now the only Irish board member who knows anything about telecoms. He must be allowed to roll out his promised plan to save Eircom at the EGM.

Ray MacSharry still merits a spell as chairman. The five old geniuses have no place on the Eircom board. None has shown any sign of promoting the interests of small shareholders.

Eircom's closure of Ebeon and the loss of £21m was an admission of staggering incompetence by the board. Alternatively, the company is jinxed.

Let us now praise real enterprise

A WORD of praise for real enterprise.

Less than two years ago, a few brave souls abandoned the cosy womb of Ireland's broking and banking cartel. They cut their links with NCB Stockbrokers (owned by Ulster Bank) and set up an independent stockbroking company. It was a high-risk challenge to Dublin's comfortable financial establishment.

Last week, the risk paid off. A poll of European fund managers propelled Merrion Capital into third place in the rankings of Irish stockbrokers. They overtook their former colleagues in NCB from a standing start.

NCB, led by Conor O'Kelly, are already fighting back, but Merrion Stockbrokers, led by John Conroy (ex-NCB), have built up a strong team that can match any in Dublin. They are not compromised, as are many others, by being unable to produce objective research, because they are not brokers to the companies on which they are reporting.

Research from Merrion Stockbrokers is objective even when it is wrong. Chief rivals Davy (owned by Bank of Ireland) and Goodbodys (owned by AIB) offer less credible advice on some companies by virtue of being in the ownership of the large banks, or brokers to those companies which they are analysing. The issue of brokers' corporate departments putting pressure on their dealing and research personnel in order to secure lucrative contracts is beginning to cause ripples in the US and the UK.

Merrion Capital have shown that it is not necessary to be owned by a big bank to succeed. Investors, even fund managers, value independent advice.

Merrion belong on the noble list of Irish companies which have challenged the banks, the semi-states and other monopolies a list which includes Ryanair (Aer Lingus); Bupa (VHI); Esat (Eircom); and Aircoach (CIE).

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