Fixing computers is big business, and this company has many advantages. It is definitely one to watch…
Need help with your home computer?
Perhaps you call up The TechGuys, owned by PC World, or the Geek Squad, from Carphone Warehouse. Or perhaps, like me, you trust one of the local guys who post their business cards through your letter box.
Anyway, all who have a computer need some help from time to time, and for those of us who rely upon it for our livelihood a swift and reliable service is absolutely crucial.
Founded in 1994 in Minnesota, Geek Squad is now owned by US electronic goods retailer BestBuy. Another American national retailer Circuit City has its own service arm, Firedog.
Now a new name is to be rolled out across the USA. It is called Nerd Force, and it is owned by Nexus Management, a small UK company whose shares trade on AIM at a price of just 0.8p.
https://finance.google.co.uk/finance?q=LON%3ANXS
Nerd Force was born in 2003 in Staten Island and now has a fleet of yellow vans out of which leap willing technology specialists ready to fix PCs. Nerd Force is now looking to franchise the business across the USA and overseas, and it starts with certain advantages.
The first of these is that neither Geek Squad nor Firedog are franchise operations, but are instead closely tied to the retail operations of Best Buy and Circuit City.
Geek Squad no longer fix computers on site but instead send them to a factory somewhere in America, from which they take a fortnight to return. As Roger Richardson, the CEO of Nexus, observes, ‘not many small business people could operate without their computer for two weeks.
The second advantage that Nerd Force will have relates to the history of Nexus, and to a deal that it struck with another US retailer of electronic goods, the Los Angeles based PD Financial.
Nexus has been around for almost twenty years, starting out as supplier of email solutions for small and medium sized businesses throughout Europe. Since then it has added a number of other services, such as remote server management, disaster recovery, data storage, a help-desk, desktop support and wide area network management and monitoring.
With a data centre in Maine, USA, and another office in Dornoch, Scotland, it can offer its services worldwide complete with round the clock telephone back-up. Traditionally Nexus has targeted small businesses, especially those operating in more than one country, but in 2006 it bought a 24% stake in PD Financial.
It’s got access to a good list
Trading as Peach Direct, PD sells electronic goods and other such luxury items as jewelry and golf clubs. It has no stores, but sells only through mail shots and its on-line channel, offering finance packages to those with a carefully vetted credit status.
The attraction for Nexus was the forty thousand or so PCs sold annually by PD. In the first year of the partnership customers for twelve thousand of these also decided to buy support from Nexus.
These were valuable extra customers for Nexus, but they were also typically private buyers who need help with the PC at weekends, in contrast to the traditional business customers who call the Nexus help desk in the week.
In February of this year Nexus sold 72% of its stake back to PD’s owners for $5m, netting a profit of £1.15m on the deal. However, the two have maintained their business relationship and it is with the encouragement of PD that Nexus have decided to buy Nerd Force.
What PD has found is that many of its customers, not only for PCs but also for items like flat screen TVs, would willingly pay extra for somebody to come and install them. So PD would like to have a relationship with Nerd Force, while Richardson sees the chance to combine the on-site service of Nerd Force with its existing remote back-up service and offer an attractive, comprehensive and good value proposition to small business and private customers.
Although the immediate plan is to franchise Nerd Force across the USA, there have already been enquiries from potential franchisees in India, Brazil and Europe and Richardson believes that Nerd Force could become a dominant force in the fragmented market of franchised IT support.
In spite of this appealing strategy the share price of Nexus has been weak of late, no doubt reflecting the retailing climate in the United States, as well as a renegotiation of payment for the sale of the stake in PD, involving a delay of two months in the payment of $2m, now due by the end of August.
Nexus has said that ‘in the event that PD is unable to pay …a charge of $100,000 per month will be levied’ – stiff terms between two business partners. The City is clearly looking for this to be resolved and for evidence that PD is countering the tough economic environment in the United States.
Beyond that there is the roll out of Nerd Force to consider. With established names already in the market place this is an ambitious plan. But with Nexus valued at just £7m the share price of Nexus is not taking a lot on trust. This is definitely one to watch.
• This article was written by Tom Bulford for the free daily email The Penny Sleuth