E-Commerce Player McGlen Internet’s Fast Start Is Over
McGlen Internet Group Inc., a high-flying online retailer that saw revenue soar over the past three years, is becoming an unwitting poster child for the fickle dot-com sector.
In a situation that shows how sudden and unexpected this spring’s Internet implosion was for many, the No.3-ranked company has gone from rising star,based on performance for the three years leading up to January,to high-profile flameout.
McGlen lost more than $2 million in the first half of this year, on sales of $19 million. And according to its most recent securities filing, it has suffered declining sales in recent months that have yet to appear in quarterly results.
McGlen officials admit they’re down, but insist they’re not out. With a new management team in place and a bite-the-bullet mindset, they say they are ready for the stark new realities of the business and have a plan to become profitable.
But troubles loom. The Tustin company laid off about a third of its 35-person workforce last month and has stopped paying creditors, including its largest supplier. Independent accountants hired by the company have expressed “substantial doubt” about the company’s ability to stay in business.
The company sells computers and computer parts over the Internet, an intensely competitive market that has grown unpopular with investors.
“We don’t expect to have the same growth rate we’ve had in the past,” said Grant Trexler, the company’s chief financial officer. “But we do expect to be growing in the future,controlled growth and profitable growth.”
In the meantime, the company is negotiating with creditors to convert debt to notes repayable over time, cutting costs and refocusing on its best customers,namely, businesses. It plans to re-launch its Web sites, Mcglen.com and AccessMicro.com, within the next few months.
Officials hope the new business-to-business focus plays better on Wall Street as they seek out much-needed capital to keep McGlen afloat.
Chairman Peter Janssen has taken over and hired on his high-tech consulting firm Janssen Associates LLC, to advise the company. McGlen founders Mike Chen, George Lee and Alex Chen expect to stay with the firm, though in reduced roles.
The company began in 1995 as online game designer Adrenalin Interactive and became McGlen Internet after being acquired in a reverse merger by e-commerce software maker McGlen Micro last year. Since then, the company has sold computer equipment online, a crowded field that includes everyone from retailing behemoth Amazon.com to Aliso Viejo-based buy.com.
Janssen has his work cut out for him, but his experience in the business should come in handy. He has been vice president of sales and marketing at computer maker Acer America, vice president of merchandising and marketing for computer equipment and software retailer Egghead, vice president of marketing for Nexgen Microsystems and founding general manager of Sears Business Centers.
McGlen officials say several things set their company apart from the horde of online retailers competing with them. For one, McGlen sells mostly individual components computer memory, graphics cards and such,rather than complete systems, a niche they intend to dominate. And McGlen has a knack for finding low-cost suppliers, Trexler said.
Equally important, he added, few online retailers have McGlen’s experience as one of the first retailers to base an entire business on selling over the Internet. n
