Vanco shares suspended, CEO resigns

Today Vanco’s shares were suspended and Allen Timpany, its founder and CEO, resigned. Basically Vanco has run out of money. On top of that they are going to have to relook at their accounts; the dreaded ‘revenue recognision’ has struck again. Although I’m not for one moment saying they will not "survive" in some guise or other, it seems unlikely that shareholders will get a bean.

I’ve known Allen for many, many years and he has been a guest at my Prince’s Trust ICT Leaders Dinners almost every year. I think I first came across him in my Apple days when he founded Apple dealer Guestel in the 1980s. He then went on to found Tycom and then Wakebourne before buying Vanco for £1 in 1989. He built it into a company that IPOed in Nov 2001 (the only UK IPO in the months after 9/11) . Vanco was a Virtual Network Operator (VNO). In other words it managed international networks for global companies without actually owning those networks itself. Buying the network capacity it needed from whoever. Indeed, that was a pretty cunning thing to do at a time when there was huge network over-capacity. You could get some pretty keen deals for your customers. I well remember BT quoting them as one of their main competitors in the network management market.

Vanco currently has over 200 pretty bluechip customers including British Airways, Siemens, Ford, Avis, Pilkington and Virgin. They work closely with SITS companies like CSC (at Belron), IBM (at Lloyds TSB) and with channel partners such as ARINC in the air transport industry and carriers and communications companies including Verizon, Bell Canada, Bell South, Comcast, AOL and Qwest .

Indeed, all the recent trading statements – even the one issued on 1st Apr 08 – had been positive with a strong order pipeline. The last issued accounts to 31st Jan 07 show revenues of £183m and Operating Profit of £19m. Quite how and why Vanco’s position has deteriorated so quickly is a mystery. I am sure that shareholders will be asking some pretty serious questions about why such positive statements were still being made just weeks before today’s pretty chilling announcement.

At one time in 2006, Vanco shares traded at over 600p making the company worth around £400m. They were suspended today on 64p/£41m. Only a couple of years back Timpany was in the Sunday Times Rich List when the value of his Vanco shares reached around £200m. He still has around 29m Vanco shares today.

Personally I don’t think there was too much wrong with the Vanco model. It was the execution that clearly was wrong. Turning sales into cash seems to have been a real problem and this should have set the alarm bells ringing long ago. I would suspect Vanco will be sold quite quickly for a 'fire sale' kind of price