Runaway reseller Micron makes its case

Hamid Kutty Shajahan, managing director and sole owner of Micron Computer LLC — one of the runaway resellers at the heart of the recent Dubai-based channel credit crisis — has spoken out on the reasons behind his shock decision to flee the UAE, leaving behind a string of outstanding debts.

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By  Stuart Wilson Published  June 13, 2006

Hamid Kutty Shajahan, managing director and sole owner of Micron Computer LLC — one of the runaway resellers at the heart of the recent Dubai-based channel credit crisis — has spoken out on the reasons behind his shock decision to flee the UAE, leaving behind a string of outstanding debts. Shajahan says that his decision to leave the country was not a pre-planned ‘hit and run’, claiming instead that the actions of Intel and its authorised distributors pushed the company into a corner, leaving him with no other option than to flee the market. Intel has already moved to distance itself from the credit crisis facing its Middle East authorised distributors, claiming that it ‘does not get involved in credit terms between distributors and resellers’. The financial collapse of several large Dubai-based resellers, including Micron, left a number of Intel authorised distributors including Empa, Logicom, Mindware and Tech Data with exposure to bad debts. According to Shajahan, distributors stopped supplying Micron with stock and simultaneously attempted to drastically reduce the credit lines open to the company by up to 70%. This reduction in the credit lines coupled with the non-supply of product meant that the company faced serious cashflow problems. “All of a sudden, 50% to 70% of the credit line is cut — this will impact any organisation,” says Shajahan. “It was difficult to run further without clearing cheques and once the cheques started to return I knew that a police case would come and I would not get the chance to speak out. That is the time when I decided to leave the country.” Shajahan says that Micron’s cashflow problems began in 2005 when the pressure exerted on his company to move an even larger number of CPUs increased dramatically. “Intel field staff would talk to the distributor and extend the credit line for us without our knowledge,” continues Shajahan. “After that the distributor is demanding for a purchase order or without our purchase order they bill it on our name. When we order for other products, they say that you must take the Intel product and only then can you get the other products. This is the kind of trap Intel and its distributors made. With our stock position mounting and needing to clear cheques on their due date we were forced to sell the product on at a loss.” “Since 2005 Intel and its distributors have called on us every month-end and quarter-end and dumped more stock on our head,” Shajahan continues. “When they dump the stock on the month-end they do not want to give any extra credit days. Ultimately to clear the cheques we have to sell the product at a 10% to 15% loss.” Asked whether it was unfair for everyone to blame the runaway resellers for the credit crisis and label them as ‘hit and run’ cases, Shajahan responded: “It is totally unfair. Nobody was there to listen to the concerns of the channel. The channel is punished so that others can make margins and numbers.” According to Shajahan, the late payment of rebates from Intel also contributed to the financial collapse of the company. Micron submitted claims for US$259,774 at the start of April and has yet to receive payment. “Until now they have not paid,” explains Shajahan. “Intel is delaying the payments without any particular reason and not giving any details to us for the delay in payment. We have sent mails to the Dubai representative office asking about the reason for the delay and they have also kept silent.” Shajahan claims that a pre-occupation with numbers meant that Intel was not concerned enough with understanding the Middle East market dynamics. “Every quarter-end we have big tension from Intel distributors and from Intel Dubai office,” he says. “They are coming to our office and pressurising us to take up huge stock, which is beyond our capacity.” “They [Intel] cannot say that they are away from the credit crisis of channels and distributors. Whenever they want to move big stock we always tell them we don’t have credit now with distributors to avoid them. But they try to talk to the distributors and come up with some extra credit line and dump the stock. We were all trapped as we have to obey to roll and run the business,” he adds. Shajahan claims that the structure of Intel programmes available to resellers look tempting at first, but can cause problems further down the line. “Once you are into it, it is very difficult to come out,” he says. “The only way to come out is to lose your business and run away.” “All these runaway companies were in the market for ten to 15 years doing clean business. After they took this product they ran into problems. One distributor was so aggressive to dump the goods. They gave an unwanted huge projection to Intel and gave huge unwanted exposure to all the companies. These people are the big losers now,” Shajahan continues. “Intel and the distributors are trying to create the image that we mismanaged their money and invested in real estate or somewhere else. It is absolutely wrong, at least in our case, and even as a victim, I strongly believe that none of the others did this,” Shajahan comments. “The Intel programme is designed for system builders to assemble the systems and sell, but they always pressured us to do more trading numbers.” Shajahan has contacted his suppliers by e-mail with a proposed settlement to try and clear Micron’s outstanding debts. Despite its recent problems, Shajahan believes that Micron still has a future in the Middle East market. “Yes, we hope to come back, because we have a good bunch of small and medium resellers and we know our capacity on sales. If the market helps by resuming credit and supply we still want to come back and we will come back,” he concluded.

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