History 2003: US Unit of Daisytek Files for Chapter XI

After heavy restructuring and the resignation of CEO Jim Powell and CFO Ralph Mitchell, replaced by Dale Booth and Eric Logan respectively, Daisytek International, a giant wholesale distributor of office products and computer media, has filed for Chapter XI bankruptcy protection for its US subsidiaries.

Among the companies concerned, the largest is Daisytek, Inc., which had severe liquidity problems, along with subsidiaries Digital Storage Inc., acquired in 2001 and Tape Co., which merged with Daisytek in 1998.

Not included in the bankruptcy filing are foreign subsidiaries in Europe, Australia, Mexico and Canada.

Over the twelve months of the past calendar year, Daisytek International registered revenues of $1.7 billion for net loss of $20 million.

PricewaterhouseCoopers sold the business and assets of the UK and Ireland businesses of Daisytek ISA, and the equity in Swedish and Norwegian units, to a newly-formed entity called ISA Trading Ltd.

Daisytek Australia has appointed a voluntary administrator to assume day-to-day management of its operations.

The appointment follows the significant tightening of credit terms by vendors.

Other problems are piling up: Daisytek International has been named in a shareholder lawsuit led by several law firms, alleging the issuance of false and misleading statements based on the improper accounting of receivables.

It is Daisytek’s vendors, of course, who are eating the heaviest losses. Digital Storage (not to be confused with French firm Digital Storage), a major reseller of DLT media,  stuck Quantum with a $1.4 million tab, which the latter was required to record on its balance sheet in bad debt charges.

Digital Storage was one of the very first distributors of tape media in the world, not only for Quantum, but also for Exabyte, OnStream, Pioneer and Sony, while its catalog included computer media of various origins (Emtec, Imation, Iomega, Maxell, Maxoptix, Mitsui, Philips, Verbatim, etc).

This article is an abstract of news published on issue 185 on June 2003 from the former paper version of Computer Data Storage Newsletter.