Personal Communications Devices said it will sell most of its assets to fellow wireless device distributor Quality One Wireless for $105.3 million, and voluntarily filed for bankruptcy protection to help facilitate the deal. Q1W has submitted a "stalking horse" or opening bid for PCD's assets, but the deal is subject to higher bids at auction. The process is likely to take up to 60 days, a PCD spokeswoman said.
According to Dow Jones Newswires, in a petition filed with U.S. Bankruptcy Court in Central Islip, N.Y., PCD listed between $100 million and $500 million in both assets and liabilities. The company cited former CEO's Philip Christopher's "scheme to ruin PCD's business" as one of the chief reasons for its Chapter 11 bankruptcy filing.
"While Mr. Christopher still worked for PCD, he conspired with several then-current PCD employees, AirTyme and Reliance, to create a competitive entity," CFO Raymond Kunzmann in an affidavit accompanying PCD's bankruptcy filing, according to Dow Jones. Mr. Christopher allegedly used that entity to recruit PCD employees "and began a campaign to disparage and defame PCD and its board of directors," Kunzmann said in the filing.
PCD wound up suing AirTyme in New York State court, and while the companies eventually reached a settlement, the suit against Christopher remains.
Christopher in May announced the formation of American Network Solutions, a company "providing special strategic consulting services to companies in the telecommunications industry, and beyond." Through his lawyers, Christopher denied he attempted to ruin PCD's business. Instead, Christopher argues he was forced out of PCD.
The bankruptcy filing does not include PCD's foreign operations in Canada. PCD said it expects to continue all business operations without interruption during the sale process. A spokeswoman did not immediately respond to a request for comment.
PCD serves as a middleman between Asian electronics manufacturers and wireless carriers such as Verizon Wireless (NYSE:VZ), AT&T Mobility (NYSE:T), Sprint (NYSE:S) and others. The company works to supply wireless devices to carriers, and generally stamps those devices with just the carrier's brand. Thus, PCD isn't a consumer-facing supplier, but rather a business-to-business operation for wireless carriers in North and South America.
However, over the past few years, as Samsung Electronics and Apple (NASDAQ:AAPL) have come to dominate much of the smartphone market, PCD said it has suffered as a result. "PCD, as a supplier of non-premium and niche handsets and wireless devices, has correspondingly been adversely affected as profit margins have continued to erode," Kunzmann said in the filing. He also said several of the company's partners began to make smartphones that never sold well, leaving PCD with too much inventory, which pushed the company to default on its debt.
As PhoneScoop notes, Q1W does many of the same things PCD does, but for smaller carriers and over a wider geographical footprint. Q1W operates as a distributor of wireless handsets, accessories, and communication equipment throughout North America, South America and the Caribbean, and also specializes in the refurbishing and repair of devices.
"This acquisition will bring together very complementary capabilities and distribution channels to dramatically increase the overall value add to device makers, telecom carriers, and retailers alike," PCD CEO George Appling said in a statement. "We are confident that the transaction will result in substantial synergies while also expanding the customer base to include both the traditional Tier 1 carrier focus of PCD and the regional carrier and dealer focus of Quality One. Moreover, both companies have been aggressively growing their accessories and M2M businesses and that focus will continue."
For more:
- see this release
- see this Dow Jones Newswires article
- see Christopher's counterclaims (PDF)
- see this PhoneScoop article
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Article updated Aug. 21 to include responses from Christopher.