You've just finished the financial year, how was it?
We just finished a record year with sales up 42 per cent versus last year. In two years we have doubled the size of the company, and are already running up another 40 per cent so far this year, although it's early days. More importantly our profits have also risen, as has our liquidity, so all in all we are entering this financial year in great shape – famous last words!
Is this the best set of financial results ever for Interactive Ideas?
Yes. Our sales declined three years ago when we pulled out of the games software market, but two years ago we beat our previous peak healthily and then last year we eclipsed it, increasing by over 50 per cent.
What do you attribute this rise to?
We pulled out of games software because the console market was so consolidated that as a distributor, you couldn't make any decent margin, but we were running some big risks. We decided then to focus on our corporate licensing business through the reseller segment and expanding our peripherals for our e-tail customers, where we add a lot of value.
We felt that boxed software would go into decline due to digital distribution, although e-tail has won so much market share it has offset this and is still a growing area for us. We looked for those areas of distribution that we could really add value to, and amount to value-added distribution – especially around Linux, open source and up and coming technologies while also providing promotion and content management for e-tail. So far these bets have all paid off handsomely.
How are you planning on capitalising on this going forward? Any plans for expansion?
We are currently hiring for two new positions in product management around open source and software services. We anticipate creating another four to five positions during the course of the year here and probably some other technical capabilities at our Indian associate company, Interfinet Technologies, in which we own a stake. I would anticipate that we would be moving into larger offices over the next 12 months as we are pretty much out of space and also extending our stake in Interfinet.
There's currently a recession on, would you say there's any elements of the financial situation that have helped Interactive Ideas?
Competitively, we entered this recession in very good shape with a rock hard balance sheet, no debt and in growth mode. It's not that we are smart, we just had our individual problems three to four years ago and addressed them radically. The recession is helping us by making it easier to hire and acquire assets to grow with.
From a market point of view, many of our key vendors like Redhat, Acronis, Sunbelt and Solarwinds represent cost reducing, performance enhancing solutions. The recession has forced corporate IT departments to try and get more for less from their budgets, whereas perhaps 12 months ago they didn't see the need. On the retail side of the business, e-tail has picked up market share and most of the items we sell are 'small ticket' – so still within everyone's budget.
You've just celebrated your 15 year anniversary, how has the firm changed in that time?
We are now 40 people and are increasingly a knowledge based business. Our corporate reseller sales team has deep technical knowledge and our marketing department is integral to the provision of value added services to our vendors and customers in both retail and reseller segments.
We are now seeing strong growth, more than at any time in our history, and of course when you are starting with a large number even a slow growth rate means adding millions of sales a year.
As we grow we are becoming increasingly professional. We don't want to lose our friendly efficient image and our 'relationship' culture, but it is difficult as you grow rapidly to preserve the things that make us unique, but I know it is vitally important that we do.
Do you think the channel will be in a better position economically by the end of the year?
Yes. There will continue to be some consolidation in the channel but I think the economy will actually turn quicker than people are expecting. There is a lot of cash sitting on the sidelines earning nothing, just waiting for assets to stop depreciating. I think we are at that turning point.
However employment will continue to decline for the next six to nine months and marginal firms will be squeezed by funding shortfalls. The financially strong however, will be investing in cost reduction strategies and acquisitions.