news Diversified technology solutions group NEC has notified its Australian staff that it will shortly undertake a round of redundancies, just months after the company warned it was facing “immediate profitability challenges” despite having a “very healthy” pipeline of contracts.
The company’s director of Human Resources, Corporate Administration and Communications, Peter Hoy, last week emailed staff stating that “like any other business”, NEC Australia regularly reviewed its operations to ensure it remained competitive in a “dynamic market”.
“During these reviews, we look at how we can improve our systems, work practices, and better utilise resources to ensure we have the right mix of capability, experience, and capacity to achieve our business goals,” Hoy wrote in the email seen by Delimiter. “As you all know, NECA is continuing its evolution from a product based technology supplier to a provider of ICT solutions and services.”
“This transition has impacted parts of our business that are product based, while solution and service focused areas have grown. The growth and increased ability of our channel partners to service our customer base has also affected those parts of the business.”
“This repositioning to a solutions and services business, along with the recent announcement regarding the sale of the Mulgrave site, will unfortunately result in a number of positions being made redundant across the business. This process is currently underway and managers of those areas directly impacted have already commenced discussions with their employees about the changes we are making.”
The company did not specify how many staff would be affected by the shift, but noted that in keeping with its past practices, it would investigate the availability of redeployment opportunities, consider staff who have expressed their willingness to be considered for voluntary redundancy, and then if unsuccessful, work respectfully with staff through the exiting process.
The news comes just months after executive-level restructuring affected NEC.
In late January NEC Australia managing director Alan Hyde unexpectedly resigned from his role leading the local operations of the Japanese company, with the chief planning officer of NEC Australia, Tetsuro Akagi (pictured), to take his place. Hyde left to take up a senior position at HP.
Hyde (see his LinkedIn profile here) was the first non-Japanese executive to lead the company in Australia, according to NEC. He was appointed in October 2010 after a career at SAP and PeopleSoft and oversaw a period of rapid expansion and corporate change for NEC in Australia, during which it bought the Technology Solutions arm of locally listed company CSG for up to $260 million and sold its Nextep broadband division to AAPT.
In an email sent to the company’s Australian employees in February, Akagi warned staff that the company had issues to face. “In my initial advice last week, I mentioned that we are facing immediate profitability challenges whilst at the same time having a very healthy pipeline,” he wrote.
According to NEC Australia’s most recent financial report filed with the Australian Securities and Investments Commission (for the year ended 31 March 2013), the company made a net loss for that year of $33.6 million off revenues of $327.1 million. The company’s headline revenue picture in that period was better than its 2012 results, when it pulled in $243.4 million, but it made a bigger loss. In 2012 the company lost about $9 million.
Part of the reason for the redundancies, according to NEC, is that the company is seeking to transition to a new headquarters. The company issued the following statement in response to Delimiter’s queries about its redundancy round:
“As part of NEC Australia’s ongoing transformation initiative which sees our business moving from a product-based operation to a solutions and services-focused organisation, we continue to re-shape the company to help meet our business goals. Wherever possible, NEC involves its employees in the change process.
A recent assessment of NEC’s head office site included an employee survey which showed employees are highly interested in a modernised workplace to reflect NEC’s technology position in the market, its customer needs and location; a design and layout encouraging collaboration and connectivity across the business, and more flexibility in the work environment. As a result, NEC has decided to sell its Mulgrave site.
This sale will support NEC Australia’s profitability and allow us to move to a location more suitable to the company’s needs as we continue to transform. The new site and timing is currently unconfirmed and will remain so until the Mulgrave property is sold. Due to staff demand and customer opportunities, the most likely location will be Melbourne CBD. In relation to this sale and workforce restructure, NEC Australia is offering voluntary redundancy packages for eligible staff in the affected areas.”
I’m not surprised that NEC is losing a few staff, given that it’s already obvious it has a few corporate challenges right now. Despite this, as I’ve previously noted, I remain optimistic about the company’s fortunes.