On 29 July I wrote about a company called Nexus Management (LON: NXS) which has an ambitious strategy and an interesting relationship with a large on-line retailer of electrical goods in the USA. At the time I expressed concern both about the retail climate in the USA and about a strange financial arrangement (more about that in a moment).

I was pleased yesterday to speak to Boris Adlam, the company’s US chairman. Adlam is an Oxford University graduate and former investment banker. He’s fluent in five languages and was once principal cellist of the National Youth Orchestra. It would be nice to be so talented, wouldn’t it?

Anyway, I was more interested in Boris’s ability to harmonise the constituent elements of Nexus and he was able to give me some very interesting background information. First of all, let me just remind you of Nexus’s business.

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In summary it offers IT back-up and support to small and large businesses and has data and call centres in Scotland and the USA. It has an investment in and a business relationship with PD Financial, a Los Angeles-based retailer of electronic and other luxury goods.

Last month Nexus bought a New York-based business called Nerd Force. It intends to franchise this across the USA and overseas. Nerd Force offers men in yellow vans who come out to your home or office and install or fix your computer. Already each time PD Financial sells a computer it offers back-up support from Nexus. This has proved to be a good source of new work for Nexus. But it now it wants to offer another piece of the technology jig-saw. This is the initial installation. At present when PD sells a computer to somebody who needs help setting it up, PD finds a local specialist who will happily accept the $200 job. Nexus would like to capture this payment by offering the service through Nerd Force.As I pointed out to Adlam, from its base in New York, Nerd Force is hardly able to install new computers all over the USA. However, Nerd Force can now say this to somebody who is thinking of becoming a franchisee in a certain district: ‘Five hundred new computers were supplied by PD into this area in the last year. Had you been the franchisee you would have had the chance to install each one of them.’ So PD is a platform upon which Nerd Force can be launched and it has already signed three new franchisees in the USA.

Highly targeted marketing should aid growth

But given the deteriorating consumer climate in the USA, the biggest influence on Nexus’s share price in the remainder of this year will probably be the sales performance of PD. Here, Adlam is very confident. He described PD’s business model as ‘the best I have ever seen’. He drew attention to the significance of a new long-term deal, signed in June, with Alliance Data which will approve, process and fund credit card transactions. With this financial backing in place, PD has now re-launched its business, changing its trading name from Peach Direct to VENUE (www.venue.com), and it hopes to continue its growth based on very sophisticated credit scoring and targeted marketing.

In simple terms, what PD does is to find, through data mining, the ideal spot at which customers have both the inclination to buy a product and the means to pay for it. There is no point in trying to sell to those who probably have every gadget already or to those who are demonstrably careful in their spending habits. And it also makes little point to sell to those who might struggle to repay. PD finds the sweet spot and can predict the outcome of any targeted marketing campaign with remarkable accuracy.

This is one feature of PD. A second is that it is a ‘virtual’ retailer. It sells only branded goods, delivery is outsourced and, crucially, it does not bear any of the financial risk in the event of a customer defaulting on payments. Now with the backing of Alliance Data and with customers finding credit cut off from other channels Adlam believes that PD is well placed.

So, finally I asked him to explain the renegotiation of the $2m payment from PD’s owners to Nexus. This followed Nexus’s sale of 72% of its stake in PD back to the latter’s owners. This was originally scheduled for June before being delayed by two months, with a strange and rather unnerving rider that ‘in the event that PD is unable to pay…..a charge of $100,000 per month will be levied.’

A genuine penny share

It seems inconceivable that PD should want to pay such a hefty penalty for late settlement, but according to Adlam such is the payback from PD’s targeted marketing campaigns that it could make sense for it to keep the cash in its own business. Since he is on the board of both companies Adlam is in a good position to know. But still I think that Nexus’s outside shareholders would be happy to see the money finally in its own coffers.

At today’s share price of 0.86p Nexus is valued at just £7.4m and so this is a genuine penny share. The strategy is clever and by offering computer users, both in the small business arena and at home, an installation service, remote back-up and on-site visits from the man in the yellow van it has a comprehensive support offering that it believes is unique.

If Nexus can pull it off – and the expansion of a franchise chain while running a transatlantic business is certainly a challenge – then the share price will go far. This is certainly one that I am monitoring.

Source: More News From Nerdland

Now there’s a new outfit in town, says Penny Sleuth UK editor Tom Bulford. It’s called Nerd Force. And Tom reckons it’s a good buy.

Nerd Force is owned by by Nexus Management (LON:NXS), a small UK company whose shares trade on AIM at a price of just 0.8p. It also have twenty years of IT experience. If NXS can handle the roll-out successfully, its shares can only rise.

All who have a computer need some help from time to time, and for those of us who rely upon it for our livelihood a swift and reliable service is absolutely crucial.

994 in Minnesota, Geek Squad is now owned by US electronic goods retailer BestBuy (NYSE:BBY). Another American national retailer, Circuit City (NYSE:CC), has its own service arm, Firedog.

Now a new name is to be rolled out across the USA. It is called Nerd Force, and it is owned by Nexus Management (LON:NXS), a small UK company whose shares trade on AIM at a price of just 0.8p.

Nerd Force was born in 2003 in Staten Island and now has a fleet of yellow vans out of which leap willing technology specialists ready to fix PCs. Nerd Force is now looking to franchise the business across the USA and overseas, and it starts with certain advantages.

The first of these is that neither Geek Squad nor Firedog are franchise operations, but are instead closely tied to the retail operations of Best Buy and Circuit City.

Geek Squad no longer fix computers on site but instead send them to a factory somewhere in America, from which they take a fortnight to return. As Roger Richardson, the CEO of Nexus, observes, ‘not many small business people could operate without their computer for two weeks.

The second advantage that Nerd Force will have relates to the history of Nexus, and to a deal that it struck with another US retailer of electronic goods, the Los Angeles based PD Financial.

Nexus has been around for almost twenty years, starting out as supplier of e-mail solutions for small and medium sized businesses throughout Europe. Since then it has added a number of other services, such as remote server management, disaster recovery, data storage, a help-desk, desktop support and wide area network management and monitoring.

With a data centre in Maine, USA, and another office in Dornock, Scotland, it can offer its services worldwide complete with round the clock telephone back-up. Traditionally Nexus has targeted small businesses, especially those operating in more than one country, but in 2006 it bought a 24% stake in PD Financial.

It’s got access to a good list

Trading as Peach Direct, PD sells electronic goods and other such luxury items as jewelry and golf clubs. It has no stores, but sells only through mail shots and its on-line channel, offering finance packages to those with a carefully vetted credit status.

The attraction for Nexus was the forty thousand or so PCs sold annually by PD. In the first year of the partnership customers for twelve thousand of these also decided to buy support from Nexus.

These were valuable extra customers for Nexus, but they were also typically private buyers who need help with the PC at weekends, in contrast to the traditional business customers who call the Nexus help desk in the week.

In February of this year Nexus sold 72% of its stake back to PD’s owners for $5m, netting a profit of £1.15m on the deal. However, the two have maintained their business relationship and it is with the encouragement of PD that Nexus have decided to buy Nerd Force.

What PD has found is that many of its customers, not only for PCs but also for items like flat screen TVs, would willingly pay extra for somebody to come and install them. So PD would like to have a relationship with Nerd Force, while Richardson sees the chance to combine the on-site service of Nerd Force with its existing remote back-up service and offer an attractive, comprehensive and good value proposition to small business and private customers.

Although the immediate plan is to franchise Nerd Force across the USA, there have already been enquiries from potential franchisees in India, Brazil and Europe and Richardson believes that Nerd Force could become a dominant force in the fragmented market of franchised IT support.

In spite of this appealing strategy the share price of Nexus has been weak of late, no doubt reflecting the retailing climate in the United States, as well as a renegotiation of payment for the sale of the stake in PD, involving a delay of two months in the payment of $2m, now due by the end of August.

Nexus has said that ‘in the event that PD is unable to pay …a charge of $100,000 per month will be levied’ – stiff terms between two business partners. The City is clearly looking for this to be resolved and for evidence that PD is countering the tough economic environment in the United States.

Beyond that there is the roll out of Nerd Force to consider. With established names already in the market place this is an ambitious plan. But with Nexus valued at just £7m the share price of Nexus is not taking a lot on trust. This is definitely one to watch.

Source: Peaches and Nerds