$4m CSG profits risked by user defections
Darwin-based IT services firm CSG could face up to $4 million in lost profits after the NSW Supreme Court ruled that it must allow customers to cut ties and jump to Fuji Xerox Australia (FXA) after it became a distributor of rival Canon.
(Ink Blots image by Tudor, CC BY-SA 2.0)
The case began in August when CSG, then also a FXA dealer, extended to Brisbane and Maroochydore its $31 million contract with Canon to service some 10,500 multifunction devices across service Sydney, Melbourne, Canberra, Adelaide and Perth.
The extension added some 1400 devices to the deal.
Fuji Xerox Australia reacted by severing its Brisbane and Maroochydore dealer agreements with CSG, and lodging proceedings with the NSW Supreme Court to determine its validity of the move.
Supreme Court Justice McDougall ruled in favour of the severance and said CSG must allow its FXA customers to cut ties with the company.
Under the court orders, CSG must provide FXA with signed deeds of novation which FXA may send to CSG customers in Brisbane and Maroochydore. This document will allow them to drop CSG for FXA or its distributors.
In a statement, CSG said financial losses could run as high as $3 million to $4 million before tax in the worst circumstance.
"However, this would only be the case if every customer in Brisbane and Maroochydore consented to the novation in favour of FXA," CSG said in a statement to the Australian Stock Exchange. "Accordingly, the impact this will have on CSG's business will depend on the number of customers who consent to the novation in favour of FXA or choose to stay with CSG.
"CSG confirms that any potential impact on its business following the order relating to novation is unlikely to be material."
FXA did not wish to make a statement, but said it will ensure CSG customers jumping ship are serviced by FXA or its distributors.
CSG will appeal the decision and is seeking a stay of orders pending the appeal.
The deal with Canon irked the Australian Services Union which in June took the device manufacturer to Fair Work Australia after it was revealed that between 30 to 40 technicians may be shifted from Canon to CSG.