Escom Files for Protection from Creditors

July 5, 1996 (CUCUG) - For Escom (and probably the Amiga itself), the sale of Amiga Technologies couldn't have come at a better time. According to published reports, Escom has filed for protection from its creditors, a move which is very similar to the filling for "Chapter 11" bankruptcy protection in the U.S. Under this arrangement a German court would allow Escom to continue to operate and to pay its debt to creditors in a structured fashion.

By Escom's own estimates, the company had piled up losses of over $117 million last year after the profitability of the PC market in Europe was turned on its head by fierce competition from off-shore vendors and soft demand among home users. Escom also is accused of making some questionable acquisitions (e.g., 200 retail shops in the UK, Commodore/Amiga and Hagenuk, a telecom hardware manufacturer) and attempting to grow too fast in a very volatile market.

A "crisis" meeting was held with shareholders and potential new investors on Tuesday to try to figure out what to do. Unfortunately for Escom, new investors were unconvinced and denied infusing enough cash into the beleaguered PC maker to pull it out of its current tailspin. The company was then forced to make Wednesday's announcement.

Earlier in the week, Escom had indicated that it would initiate a restructuring plan and would close 65 of its 235 retail shops in Britain, additional stores in Europe, sell off sub-companies (like Amiga Technologies) and reduce its workforce from 4,400 to 2,500--an eventual 43% reduction in employees.

For Escom, the reported $40 million selling price of its Amiga Technologies unit will help, but is more like a drop in the bucket especially since an undisclosed portion of the amount is in VIScorp stock.

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