Wileyfox entered administration on February 12 after its main benefactor, Russian bank Promsvyazbank (PSB) collapsed and revived with a $3.4 billion (£2.6 billion) injection from Russia’s central bank. It was the third such rescue last year.
From the bailout, special measures were put in place, one of which began the toppling of the dominoes for Wileyfox. The Russian central bank stated outside investment or lending was prohibited, drying up resources for the London-based manufacturer.
In the aftermath, 50 members of staff across its European bases have been laid off. Globally the firm had 100 staff. Wileyfox CEO Michael Coombes (pictured above) confirmed developments to Mobile News after it was broken on social news website Reddit by an alleged employee carrying the handle Wileyfox-Jack.
That was followed by a statement from auditors Quantama who were confirmed administrators to the company. Quantama partners Andrew Andronikou and Andrew Hosking were appointed administrators.
Andronikou said Wileyfox has not been successful in selling smartphones. “We are looking at prospective interested parties to buy the goodwill and IPR associated with the business to take forward the operations in Europe,” he said.
Andronikou added there were many areas where savings could be made in order to secure a future for WileyFox, particularly within marketing and PR. He said: “Distribution of the handset hasn’t been successful, it hasn’t penetrated the market in accordance with the time set out [by management].”
Coombes did not comment on Andronikou’s statement on device distribution success. He told Mobile News: “We’re restructuring the whole business and will continue.
“PSB collapsing in December was a surprise, we’ve been forced into this until we can fix it. We’re going to close a couple areas where savings could be made in order to secure a future for WileyFox, particularly within marketing and PR.
He said: “Distribution of the handset hasn’t been successful, it hasn’t penetrated the market in accordance with the time set out [by management].”
Coombes did not comment on Andronikou’s statement on device distribution success. He told Mobile News: “We’re restructuring the whole business and will continue.
“PSB collapsing in December was a surprise, we’ve been forced into this until we can fix it. We’re going to close a couple of the business units of Wileyfox Europe which managed sales and moving it to Wileyfox International.
“The plan is to fi nd a solution. We’re looking at our option to restructure the business and continue operating.” Coombes said customers will still see after-sale support and updates to devices as the company will “carry on”.
A Wileyfox Group statement read: “The purpose of the administration is to restructure the Wileyfox Group, reduce its cost base in Europe and ensure its long-term future across all the markets it operates in.
Regretfully, as a result of this, certain redundancies have been inevitable in Wileyfox Europe and the Wileyfox Group is working with those affected to ensure they have the support needed to find alternative employment.
“The Wileyfox Group is committed to working with partners, distributors and customers in Europe to ensure, as far as possible, uninterrupted support and service for Wileyfox mobile handsets in the market, as well as outline the Group’s future plans in this core market.
“All other subsidiaries of the Wileyfox Group continue to operate as normal and their operations remain unaffected by the Wileyfox Europe administration.”
Wileyfox began life as ‘Brand X’, founded by Coombes and chief marketing officer Naeem Walji. Both previously worked for fellow budget handset manufacturer Kazam, which is also owned by holding company Meridian Capital Partners. Kazam entered administration in April last year, according to Companies House.
Both Coombes and Walji moved over to Wileyfox, stating the Kazam brand was not profitable enough to move forward in the channel. The “race to the bottom in price” was not sustainable business, according to Coombes, who saw more potential with energy invested in Wileyfox.
The manufacturer launched itself at the channel in August 2015 under the guidance of channel veteran and fellow Wileyfox founder Nick Muir and then chief marketing officer Victoria Denman.
They oversaw a strong start, selling more than half a million (600,000) devices in 2016. Devices were distributed exclusively by Exertis since its conception in 2015 and were then ranged in Carphone Warehouse (online), Amazon, Clove Technology, Expansys and ebuyer.
Around 12 months ago Coombes spoke to Mobile News, laying out the ambition to hit two million in shipments, become a leader in certain markets and one day break the US and Far East to become a global player in the vendor space.
It won best challenger manufacturer and was commended for best smartphone at the 2017 Mobile News Awards.
Its high ambition was considered almost impossible from the off, and is now even further out of reach with staff members being let go and increased competition in the sub-£200 segment from tier one and two manufacturers.
Ovum senior analyst Daniel Gleeson said: “The demise of Wileyfox is unfortunate but ultimately it underscores the big challenges facing small smartphone brands. The smartphone market is extremely competitive with very tight margins.
This is why this funding shortage was a fatal blow for Wileyfox; it simply did not have the cash on hand to bridge to finding a new lender.
“Most of the smaller manufacturers are private companies and we generally do not find out much about their funding situation until they either go public or something goes wrong.”
Canalys analyst Ben Stanton said the writing is on the wall due to staff cuts, which is in line with the administrative process. “Its immediate staff layoffs suggest that long term prospects are grim, he said. “It will be too challenging to drive the business forward with a depleted workforce.”
Coombes promised future devices will be released with some delay. The B2B-focused Wileyfox Pro was slated for a Valentine’s Day release and the follow-up to the Swift 2 and Swift 2 X will be released this year.
Coombes said: “Customer service will continue in regards to repairs and updates. There will be a couple of days where we cease operations due to administrative process. “Future phone launches will only be pushed back a few days, the Wileyfox Pro will be released this month (February) if all goes to plan.”
Coombes said the Pro will serve to arm businesses that desire an affordable Windows 10 device, and cater to a niche. IDC senior research analyst Marta Pinto believes it is unlikely Wileyfox will recover from its predicament even with new releases and will need huge investments to repair its image.
She said: “It is very unlikely that Wileyfox will recover. To offset the losses and restart would require huge investments to repair brand image and release a compelling offer.
So far, the latest announcement in November 2017 was of a Windows 10 mobile device, an operating system doomed from the start of 2018 onwards.”
uSwitch senior commercial manager Ernest Doku added: “UK CEO Michael Coombes remains optimistic from a perspective of courting potential buyers and finding new funding sources, and considering this withdrawal is due to financial constraints as opposed to out-and-out consumer apathy, there’s still a narrow window of opportunity to find a path back into the space – things are incredibly challenging for decades-old manufacturers
as is.”
Wileyfox struggled initially to establish itself a niche, according to Stanton. Doro established itself as a manufacturer for the over-65s.
RugGear and Bullit entered the ruggedised market creating smartphones for professionals who require near indestructible devices that come with heat detection and extreme battery life.
Wileyfox never found a niche like this, and as soon as Chinese brands started taking younger demographics seriously, it was always going to struggle.
The need to find a niche was echoed by Doku: “The likes of Doro have managed to not just co-exist but be incredibly successful by catering heavily to a particular demographic, despite manufacturers targeting the value market incredibly aggressively – with brand budgets to match.
Former Wileyfox CEO Nick Muir told Mobile News the manufacturer went astray from its original proposition of being as direct to customers as possible, which coincided with the thin margins the manufacturer was operating in.
The firm went down the route of a traditional manufacturer courting ranging from mobile network operators, such misalignment in direction caused Muir to depart the firm. Muir said: “I can’t say I’m not enormously surprised.
When we started the Wileyfox proposition its purpose and clarity and the idea was to produce a pureplay outfit that brought consumer value.
It was clear, it was understood and we knew how we were going to bring it around. “The original Wileyfox proposition was the product needed to be supplied as directly to the consumer as possible. With the lowest possible cost base behind it.
“Everything Wileyfox did had to have one eye on supplying consumer with value. I don’t know what they’re philosophy was butit seemed more mainstream with wanting to approach carriers, what other handset manufacturers were enacting.
If Wileyfox is to survive it faces not only the challenge of rivals but also a market that is slowly declining, according to Pinto. According to figures from IDC for Q2 2017, global smartphone sales dropped 1.3 per cent to 341.6 million, year-on-year.
“In western Europe, the overall market is contracting for the fifth year in a row, making it more challenging for the players to put in place a compelling but profitable offering. Wileyfox is not the only manufacturer to struggle, as huge amounts of investment are needed to survive in such a competitive space”, she said.
“How does one survive in a falling market? First, put in place a compelling offer. The brand needs to build its story to convince already doubtful consumers.
“Smartphone lifecycle is growing, for a number of different reasons, and brands really need to tell consumers why they need a new device and why they need it now.
“Secondly, brands must ensure the device is available in a convenient point of sale and that customer care doesn’t end when the transaction is fi nished.
“Since consumers stick to the device longer, they need support during the product’s life-cycle”. Stanton said Wileyfox did not utilise national pride as much as it should have.
“One thing Wileyfox lacked, which other similar brands have done well, is a sense of national identity in the UK market. Wiko does this very well in France, and BQ also does it in Spain.
“They are known as local brands, a source of national pride. Ironically, Wiko is not truly a French company, but it is all about how the brand is positioned.” With funds having dried up a cash injection is crucial if Wileyfox have even a hope to continue, believes Gleeson. But much needed investment is “unlikely”.
Gleeson said: “It’s hard to see how Wileyfox continues from here – realistically it needs a huge infl ux in cash and it is unlikely, given its predicament and its position in the market that it will be able to find this cash quickly enough.
“It is making drastic cuts to staff to try to rein in costs, but that does obviously affect how well its business can perform over the next few months.”
Most small manufacturers don’t have the luxury of having a larger parent to ride out period of financial trouble. Honor has Huawei and OnePlus has Oppo. Doku says Wileyfox is merely a victim of an external factor that could not have been predicted or controlled.
“Those phone makers operating on a knife edge when it comes to profitability only need a minor hurdle to scupper plans, and the removal of its Russian funding and a cut-throat industry were far greater than they could overcome.
“Despite being nimble enough to move within a dynamically shifting mobile landscape, Wileyfox simply seems to have been victim to issues outside of their direct control in addition to stiffer competition than ever.”
