Time runs out for Tiny: a British system failure

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The Independent Online

The situation was so grim - with losses of between £1m and £2m a month since January 2005 - that the group's administrator, Grant Thornton, has ruled out attempts to sell it as a going concern.

But the collapse of Granville, months after MG Rover went under, also highlights the pressures heaped on British manufacturing by lower-cost producers in Asia. "The PC industry, like the car industry, will end up with very few players," says Ranjit Atwal, a senior analyst at research firm Gartner.

Across the world, personal computer companies are struggling - even the bigger players. Hewlett-Packard, until recently the industry leader, has announced plans to cut 14,500 jobs, and in April IBM offloaded its PC business to the Chinese firm Lenovo. Toshiba and NEC both reported large losses recently, while Sun Microsystems is also troubled by the poor performance of its main division, which sells computers and servers.

Dell, much lauded by industry observers, is seen as the one exception.

The problem is that while demand for PCs is still strong, prices are falling. In the second quarter of 2005, says Mr Atwal, the volume sold in Europe increased by 20 per cent, but the revenue during the same period rose by only 7 per cent.

But while this is a global problem, Britain is suffering more than most. The cycle of falling prices will have hit Granville hard. It assembled its PCs in the Lancashire town of Burnley, where it employed 900 people and supplied the company's retail chain. "It came to a point where it was unable to compete on a cost perspective," says Mr Atwal.

That was partly because it lacked the size of its much larger competitors, even though around two million Tiny and Time computers are found in UK homes.

" 'Scale' is the key word. You really need to be a major volume player to absorb the cost and margin pressures," says Phil Codling, senior analyst at technology researchers Ovum.

It isn't just a question of economics; the rise of the low-cost producers has also meant that it's hard to tell one brand from another. "Even if the products are great, frankly it's pretty difficult to distinguish them," Mr Codling believes. "What you are doing is assembling bits that work together."

He says the one area in which PC makers can outdo their rivals is technical support - but that the British company may have let itself down in this respect. "I understand Tiny didn't have the best reputation there."

Granville would have struggled anyway with the rise of the cheaper machines, but industry analysts say its business model was flawed. Its retail store struggled to compete with Dixons' PC World and its machines, despite being produced in high-wage Britain, were seen as inferior. "It was average products, well marketed," says computer and technology consultant Anthony Capstick. When the competition was less intense, he adds, it was able to offer a cheaper deal through cutting corners.

"It bought top-end processors and used lower-tier motherboards and components to charge lower prices. It would bundle lots of software with it and place a lot of advertising."

But this model started to unravel. "Really, time has caught up with them because Dell has got such a slick, global operation. There's no way they could keep up," explains Mr Capstick.

While Granville may have been the victim of market forces, questions have also been raised about its collapse. The company's last filed financial statements were for the year to 28 June 2003, when it reported a profit of £2.5m on sales of £207m. That was a year after it recorded a £10.8m loss.

Nigel Evans, the local Conservative MP, wants a Department of Trade and Industry investigation. "Surely alarm bells must have been ringing," he says, noting that it is more than two years since the company last filed accounts.

Unions have also called for an investigation, with concerns about the behaviour of the company's directors. All of them, bar one, have resigned in recent weeks, including Tariq Mohammed and Tahir Mohsan. The two owned 40 per cent and 60 per cent of the company respectively, through a web of companies in the British Virgin Islands and Jersey. Mr Mohsan is said to be worth £70m.

In those last accounts, bank loans stood at £26m, with HSBC the main banker, while the net debt was £37.6m. Since then the position has clearly deteriorated, although the administrators could not confirm the size of the debts.

Whatever the reasons for the collapse, there seems no hope that Tiny and Time will be resurrected, with the brands having a poor reputation. Surveys by the consumer group Which? have placed them at or near the bottom of customer satisfaction tables.

"I don't think there's any room for a UK manufacturer," says Mr Capstick.