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Early last August, Merisel Canada Inc. flipped the switch on a new computer system that would link its national warehouse and administrative operations and carry it comfortably beyond the year 2000. The computers turned on all right, but in the process, Merisel threw itself into a six-month blackout that has cost the company its prized position at the top of Canada's computer distribution heap.
Four years in the planning, the company's "IT 2000" strategy would marry the MILES (Merisel Integrated Logistics Efficiency System) warehouse technology with a new SAP administration system in a move designed to integrate all Canadian operations, drive down costs and dramatically raise the company's competitiveness. Instead, the implementation of the bug-riddled and inefficient system resulted in missed deliveries, major service backlogs and a much-publicized migration of Merisel customers to competing distributors.
The crisis delivered a body blow to Merisel Canada that is being felt all the way in El Segundo, Calif., where corporate parent Merisel Inc. is caught in a downward financial spiral that was fuelled last month by the announcement of a US$83.9 million loss for 1995. The company continues to reel under more than US$250 million of long-term debt that it simply can't service in a market where profit margins of 7 or 8 per cent are a way of life. The Canadian operation posted a net less for 1995 after taking writedowns on the value of its SAP assets, but held its own last year with an operating profit.
Merisel Inc. is also holding critical talks with lenders to amend the terms of its debt; these negotiations will probably determine whether the company will be able to continue to operate in 1996 without selling assets. The company is also exploring the possibility of an equity investment that might include an outright purchase by an outside investor.
In short, it's been a miserable year for the company as a whole and especially for one of its rising stars, Merisel Canada president Tom Reeves, a nine-year Merisel veteran who marshalled the systems conversion and is now charged with getting the Canadian unit back on its feet. Reeves believes misery is too strong a word to describe the events of the past six months, but during a two-hour interview on...