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How Britain lost Sendo

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New filings cast light on the sad demise of Britain's only mobile phone manufacturer, Sendo.

Following protracted legal battles with former partner and shareholder Microsoft and others, the group finally ran of money, and its assets were sold to Motorola in June.

Motorola seems to have got rather a bargain, according to reports recently filed by the administrators, Kroll.

It paid the surprisingly low sum of $30,000 (£16,884) for the intellectual property of Sendo Holdings PLC, the parent company for the Sendo group.

Motorola paid £362,575 ($638,749) for the plant, machinery and equipment of Sendo's main UK subsidiary, Sendo Limited.

The filings show that Sendo's financial troubles became serious earlier than many thought.

"From March 2004 the group began to experience financial difficulties as a consequence of reduced sales and margins caused by difficult market conditions and higher manufacturing costs," the filing notes.

"The Group experienced deterioration in the margins on products as a result of pricing pressures in the marketplace and the high cost of manufacture of products," it says.

Sendo told investment bank Lehman Brothers to hoist the 'for sale' sign late in 2004. Four buyers were interested, but none would agree a deal.

In May 2005, Sendo failed to make payments to Celestica, the Canadian electronics manufacturer which made up Sendo's designs.

Celestica, itself struggling to restructure and return to profit, called in the administrators, who were finally appointed at the end of June. Motorola started talks on June 21, and the sale was agreed eight days later.

Sendo Holdings owes Celestica £110m, the documents say, and has £29m of debts to other companies.

The one name conspicuously missing from Sendo's filings is Microsoft. It isn't mentioned at all, despite the fact that its spectacular falling out with Sendo in 2002 set the mobile phone firm back a long way in its bid to launch a smartphone.

The two companies then set to in a brutal legal battle, which contributed £6m to the £46m of losses that Sendo booked for the year to September 30 2003.

The collapse of Sendo means we may never know if, and how much, Microsoft paid to settle the case last September, as accounts for 2004 are unlikely to be filed.

The Microsoft case, and Sendo's other legal battles won't have helped its cause, wasting money and management time which might better have been invested in product development.

But the demise of Sendo is not so much due to Redmond skulduggery, as the sheer difficulty of being a small player in a high-volume market like mobile phones, particularly if you're based in high-cost Britain.

Sendo's strategy of pursuing both ends of the market without the research budgets or the economies of scale of a major player made the odds against success even worse.

Representatives of Kroll declined to provide comment for this story. Likewise Celestica. ®

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