Zenith RMM Investigates Alternatives, Reassures Partners

Zenith Infotech and Zenith RMM are doing their best to
reassure partners in the wake of the news that Zenith Infotech defaulted on its
bond payment to QVT Financial on Sept. 21.

It’s business as usual at Zenith Infotech, a spokeswoman
told Channel Insider, with the company maintaining its schedule of tradeshows
and product releases going forward, and reassuring partners that it remains financially
viable and stable. However, the company still  cannot comment on anything to do with the bond
default.

Click here to read: Zenith Infotech Defaults On Bonds

Meanwhile at Zenith RMM, the portion of the company that was
sold for a majority stake to Summit Partners in a deal consummated on Sept. 26
and announced on Sept. 28, CEO Michael George told Channel Insider that his new
company’s first concern is to take care of its partner customers.

“We are fully committed to supporting every one of our
contracted customers, including those who are supporting any one of the Zenith
Infotech endpoints,” said George.  That
said, George added “We are being asked by our partners that we share with
Zenith Infotech to provide some guarantees or alternatives to them should
Infotech not return to being a good standing partner with their financial
partners in the marketplace.”

Before partners leap to an alternative offer to Zenith
Infotech’s cloud or back up services, “we want our partners in common to have a
place to go. We are evaluating alternatives and we will, should the Infotech
position not improve, we will provide a smooth transition for all of our
partners.”

With that in mind, Zenith RMM’s alternatives could encompass
one of four scenarios, George confirmed. They include acquiring another
company, partnering with another company, developing the technology internally,
or using technology that may exist in majority stakeholder Summit Partners’
portfolio of companies.  Not currently
under consideration is any move to shift Zenith Infotech’s remaining technology
to Zenith RMM, George told Channel Insider, answering a question.

“Whatever is best for our partners is foremost under
consideration for us,” George said. “That is our top priority.”

For now, Zenith RMM is encouraging partners to take a wait
and see attitude.

George also decried emails sent to partners from competitors
that he called “preditor-like” as Zenith Infotech and even Zenith RMM
competitors looked to take advantage of the perceived instability to gain
market share from Zenith.

Separately, answering a question, George said that he knew
of no provision that would invalidate the sale of Zenith RMM to Summit
Partners, even though the sale happened five days after the bond default. The
Times of India had reported that bond holder QVT Financial had questioned the
sale, asked that it be halted if it hadn’t already been consummated, and filed
suit for information about the sale to be released.

Zenith Infotech is a publicly traded company, but because it
is based outside of the United States, it has not been subject to the same
financial reporting standards as companies listed on U.S. stock exchanges.
However, Bloomberg/Businessweek lists summaries of the Zenith
Infotech’s financials, earnings and board members here.  It notes that Zenith Infotech’s earnings for
the last reported quarter ended June 30, 2011 dropped to $998.1K compared with
$2.2 million for the same quarter the year before, in spite of higher revenues for
the quarter year over year, from $17.7 million in 2010 to $18.7 million in 2011
for the quarter ended June 30. Bloomberg/Businessweek attributes the difference
to an increase in the percentage of sales devoted to cost of goods sold from
45.18 percent to 59.52 percent.