Channel concern mounts over Fortex-MID credit risk
Concern is mounting in the Dubai distribution community over the ability of the Fortex-MID group to repay millions of dollars of outstanding channel credit. One major Dubai-based distributor confirmed that cheques it recently tried to cash from Fortex-MID bounced. Employees at Fortex-MID admit that company boss Mehdi Asghari is out of the country and are unable to say when he will return to the UAE.
Concern is mounting in the Dubai distribution community over the ability of the Fortex-MID group to repay millions of dollars of outstanding channel credit.
One major Dubai-based distributor confirmed that cheques it recently tried to cash from Fortex-MID bounced. Employees at Fortex-MID admit that company boss Mehdi Asghari is currently out of the country and are unable to say when he will return to the UAE.
Anupam Goel, sales and marketing director at Micro International Distribution (MID), the distribution arm of the Fortex Group, admitted: “Yes, Mehdi Asghari is still out of the country. We are not in touch with him, we have no communication and we do not really know what is going on.”
Fortex-MID is a major player in the Dubai channel renowned for its activities trading Intel CPUs. The company purchases significant amounts of product from authorised Intel distributors such as Logicom, Mindware, Tech Data and Empa. The company also has direct purchasing rights with several major vendors.
Distributors in the market remain on tenterhooks as they attempt to ascertain whether or not the bounced cheques from Fortex-MID are due to short-term cashflow problems or indicative of a classic channel ‘hit and run’.
Pavan Gupta, EMEA director at components distribution giant eSys, commented: "I have met with Fortex-MID and it is my understanding that it is a short-term cash flow problem. They should have ensured that there was formal communication with the market to stop any rumours from spreading."
Gupta believes that Fortex-MID is doing everything in its power to work through its cash flow issues and says that suppliers should communicate with the company and work through any payment problems.
“We have all heard the rumour that the owner has run away although I cannot confirm this yet,” commented Hesham Tantawi, VP at regional distributor Asbis. “We have heard from multiple distributors that cheques from MID have bounced. Luckily, we don’t supply them so we have no exposure.”
One distributor confirmed that it recently visited Fortex-MID's warehouse facility and reclaimed approximately US$18,000 worth of kit it had sold to the company.
The amount of credit exposure that Fortex-MID holds in the market dwarfs the levels that runaway cases such as DCS and eMachine had before their sudden departures, according to informed channel sources. If Asghari fails to reappear in the UAE soon and MID cheques continue to bounce the Middle East channel is facing one of its biggest cashflow disasters to date.
“I heard that the cheques started bouncing last week,” said one distributor. “The amounts have not yet been confirmed but it has the potential to be one of the biggest in history. It is the same story as DCS and eMachine and the more I hear, the more I believe it is true. It coincided with the end of the first quarter and that is a tempting time for an Intel partner to do this because of the nature of the cash flow.”
Intel has so far been unavailable for comment on the situation regarding Fortex-MID. The company has spoken in the past about credit insurance programmes for its authorised distribution partners in the Middle East, which may well provide a lifeline for distributors facing losses if the situation regarding Fortex-MID does not improve.
In this year’s Channel Middle East Power List, Goel claimed that Fortex-MID’s turnover hit US$160m in 2005. Besides its Intel trading business, Fortex-MID is also involved in the distribution of hard drives and boasts an in-house assembly operation.
One concerned Fortex-MID employee added: “It is still just a rumour but obviously we are concerned as employees of MID. The last I heard was that Mr. Asghari is away on a business trip and will be back at the end of this week.”