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August 10, 1997updated 03 Sep 2016 7:21pm

GANDALF FINDS A PARTIAL BUYER AT LAST

By CBR Staff Writer

Gandalf Technologies Inc, the long-term ailing Canadian networking company has at last found someone interested in buying at least part of the company. Computer telephony integration specialist Mitel Corp is to pay a knock down price of $14.9m in cash for what it calls Gandalf’s technology business. This refers to all Gandalf’s products, sales and R&D operations. The deal leaves behind Gandalf’s service and support efforts. The fire sale continues, however, as Gandalf says it is still seeking a buyer for the services business which it says is profitable and accounted for 40% of the company’s revenues. Although it is difficult to imagine that the business will garner much interest or value now that its is detatched from the product line. Although under the terms of the deal Mitel has technical obligations to keep the services business informed regarding technical information, Gandalf or whoever may take on the unit will not necessarily win any continuing service contracts from Mitel. Mitel also gets all rights to the Gandalf name when the company begins to ship products, which it says it will do within six months. Mitel says it had been talking to Gandalf some months ago about taking on the whole company but pulled back as it does not want to be involved in the service side of the business. According to Kirk Mandy, VP at Mitel, negotiations to take the technology business at Gandalf began only a week ago. Mitel says it will take on between 50 to 100 people in R&D, sales and marketing, manufacturing and administrative support functions from Gandalf’s current headcount of around 300 worldwide. Gandalf says it has yet to decide what will happen to its subsidiaries in the UK and the Netherlands. Mitel says it will concentrate on Gandalf’s remote access line of XpressStack, Xpressway and XpressConnect although it gained Gandalf’s entire product line and intellectual rights. Mitel is confident that the technology was not the demise of Gandalf but rather the company’s switch from direct to indirect sales although it does admit the development of the remote access products may have suffered during Gandalf’s long standing financial troubles. Gandalf did try to support the remote access line as a core business. It is not intact but it is not in bad shape, says Mandy. Gandalf has been hawking around its assets for at least six months when the company first announced it needed outside funding if it was to fight off pressure from its creditors. According to Gandalf, the low price is the best it could expect given that the company had pitched its ware to more than 70 companies over the past six months in a hope to solve its problems. The deal with Mitel came as one in a long line of Friday announcements each worse than the last. In the past few months Gandalf has announced its is to call in receivers for its UK subsidiaries, has cut 180 jobs and, along with its subsidiary, Gandalf Canada Ltd sought protection from its creditors under the Companies’ Creditors Arrangement Act (CCAA), advised its shareholders that it was unable to extend its line of credit with its bank the Royal Bank of Canada, and could not find a strategic partner or arranging additional financing. But the most undignified troubles of all occurred when all the company’s staff at the headquarters and manufacturing facility in Nepean, Ontario, were locked out when the landlord believed the company would not be able to pay its rent. The temporary CCAA protection finishes October 31 1997.

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