eSys lays off staff ahead of Teledata merger
22 February 07 The Straits Times by Gabriel Chen
POSTER boy entrepreneur Vikas Goel's eSys Technologies has laid off nearly one-sixth of its Singapore workforce, just before a merger with Chennai-based Teledata Informatics.
eSys, one of the world's largest distributors of hard disks, said yesterday it has whittled down the number of employees at its Singapore headquarters to around 130, from 155.
The cut in staff strength, it said, is a 'manpower rationalisation' as part of an integration exercise with Teledata, which has about 200 staff in Singapore.
'But in the next six months or so, we'll be hiring more people, and the combined number will be greater than 330,' eSys' chief operating officer, Mr Neeraj Chauhan, told The Straits Times, quashing rumours that eSys had retrenched staff because it was in financial difficulties.
Yesterday, eSys confirmed media reports that Teledata, a company whose $210 million worth of assets include ships, schools, a port and a wind power plant, had acquired a majority stake in it.
Teledata will inject US$105 million (S$161.1 million) to take a 51 per cent stake in eSys, which will be part of a group of software services companies under the wing of Teledata Technologies, a business unit of Teledata.
Mr Goel, who will hold a 49 per cent in eSys, will be chief executive of Teledata Technologies. He was unavailable for comment yesterday.
While eSys' revenues soared from $187 million five years ago to $3 billion in 2005, the firm has encountered some hard times of late.
Mr Goel was embroiled in fraud allegations made by a firm, Karma International, and its Swiss-based unit. However, the claims were dropped last November after the two firms said the matter had been 'amicably resolved''.
Soon after that, eSys lost a major client, Seagate Technology, which had contributed about 30 per cent of its revenue. Seagate fired eSys as its distributor after eSys reportedly refused to let Seagate's third-party auditors access its sales records. However, eSys has said the requested audit would have been 'intrusive'.
Given this backdrop, some observers say this 'new infusion of capital' comes at an opportune time for eSys to further its business by aiding its acquisitions and growth.
Currently, eSys' clients include South Korea's Samsung Electronics, memory chip maker Hynix Semiconductor and Intel.
Mr Nav Qirti, eSys' media relations spokesman, noted that the merger, which will see Mr Goel relinquish his majority stake, is not a step backwards for Mr Goel, who has snagged many awards for entrepenurship, including the 2005 Ernst & Young Entrepreneur of the Year award in Singapore.
'The merger will give a larger field for Vikas to execute his vision and unlock major business opportunities,' Mr Qirti said.
'This is a step forward for Vikas and eSys as it will give him a much wider platform across the information technology spectrum.'
Teledata managing director K. Padmanabhan told India's Business Standard newspaper earlier this week that the investment will enable the firm to capitalise on the synergy between Teledata and eSys.
This is because every year the company buys 3,000 to 4,000 personal computers (PCs) for several e-governance projects, he said, but this year it plans to buy 15,000 PCs. 'The eSys acquisition will now make these projects cost-effective,' said Mr Padmanabhan.
Mr Qirti said the merger will not affect eSys' plans to list its shares in either Singapore or Dubai next year. 'Regarding listing, dual listing is a possibility in the future, but at the moment we're concentrating more on the integration process with Teledata,' he said.
Chain of events
LAWSUIT DROPPED Mr Vikas Goel was alleged to have conspired with a few other parties to defraud Karma International and its subsidiary CHS CPO, which was declared bankrupt in 2000. He was also said to have fraudulently transferred assets and shares to eSys. In November, lawyers for Karma and CHS CPO dropped the suit and all allegations against Mr Goel after reviewing documents and considering the defences he raised.
SEAGATE DUMPS ESYS About a week later, Seagate, the world's biggest maker of computer disk drives, terminated its distributor agreement with eSys, reportedly due to the refusal of eSys to let Seagate's third-party auditors access its sales records. eSys denied the allegations, saying the requested audit would have been 'intrusive'.
RESTRUCTURING EXERCISE According to industry sources, eSys recently conducted a worldwide retrenchment exercise, axing about 50 staff from its Singapore headquarters. eSys says this is untrue, stating that because of the merger, a 'restructuring exercise' took place. While it had around 155 employees in Singapore at the beginning of this month, the workforce now numbers 130.