Zenith Infotech Partners Concerned About Company's Financial Status

Several Zenith Infotech partners said they are concerned about the company's financial viability going forward following reports that the company is in default for as much as $85 million in convertible bonds.

"We have lots of BDRs [Zenith Backup and Disaster Recovery solutions] in the field and my first concern is what's the ongoing warranty support for that and for clients with data stored in Zenith's online storage," said Mike Jennings, president of Business Engineering, Reston, Va.

Jennings said Business Engineering no longer sells Zenith solutions to new customers because he found a competing solution he likes better, but he has still more than 200 customer servers deployed with Zenith. "It does make you worry a bit. We'll see what happens. I'm not going to pull out the BDRs or move data around," he said.

The only communication Business Engineering has received is an e-mail from Zenith Infotech CEO Akash Saraf that maintains Zenith Infotech is "financially solvent, strong and stable." Saraf acknowledged in the letter that Zenith Infotech has defaulted in payment obligations but did not detail the company's plan to reduce or eliminate the debt.

"I thought the e-mail was weak. It said the news was factually correct but didn't say anything more about the troubles. I wanted more details," Jennings said. "It's a little disappointing that the company has not directly responded more to partners but I can understand from a corporate standpoint they're trying to keep all communication through one point."

John Motazedi, president of SNC Squared, a Joplin, Mo.-based VAR and Zenith Infotech partner, also was concerned about the lack of detail in the letter and lack of communication to partners.

"While he said we're strong and did do the default, it didn't explain what happened. That was the thing I was concerned about. I felt some aspects of it were just blowing smoke. He didn't tell me what it was and wiithout really spilling the beans, I thought they could have gotten more discussion with partners about what's happening and what they're doing. We have a lot of zenith BDRs out there. I just don't think the e-mail should just be a shrug-off," Motazedi said.

Motazedi added that he's also concerned about the customer data he has in the cloud using Zenith's solutions, but he's not actively seeking another solution just yet. He credited Zenith Infotech for helping him recover his business after his headquarters was wiped out by a tornado earlier this year.

"They've saved my tail enough times. I'm not just jumping ship but I have my eyes open. We have some other partners we could move to rapidly, but we're not doning anything at this time. I'm going to give them the benefit of the doubt. I want them to succeed. They're a good company and have good solution out there," Motazedi said.

Another Zenith Infotech partner who asked not to be named said he is "extremely nervous" about the company's future because of the defaulted loans.

Next: Partners Also Worried About Zenith RMM

"It's not good news. We haven't heard from anybody. I'm keeping my options open and looking at different platforms," said the partner, who added that he had no idea Zenith Infotech was having financial difficulties until late last week.

"I obviously was kind of wondering why Zenith spun off the RMM piece to the new company. That struck me as a little odd but I didn't think anything of it but I hear of the default and it make sense now," said the partner.

In late September, Zenith Infotech sold off its remote monitoring and management business to investors, which spun off that business into a new company, Zenith RMM, in which Saraf serves on the board and Zenith Infotech retains a stake.

Ed Finn, president of Metro Managed IT, a Burke, Va.-based MSP, only uses Zenith RMM solutions, but still has concerns about that company considering Zenith Infotech is a big shareholder.

"I don't have any [BDR] hardware holdings from Zenith [Infotech], which makes me feel pretty good right now," Finn said. "It did raise flags to me when they split the companies. Generally there's a reason for that."

Metro Managed IT chose Zenith as its remote monitoring and management solution several years ago because of its NOC and ability to remediate as well as monitor, Finn said. With the financial uncertainty surrounding Zenith, he said he plans to start looking at competing solutions.

"Any wise partner should be planning for the worst. It could save several weeks of searching around when you may not have that time in the future," Finn said. Like the other partners, Finn hasn't heard anything directly from Zenith.

"Whatever we hear is going to try to sound reassuring, but it's not going to reassure me," Finn said. "The only thing to make me feel better is to have the business continue unchanged for a number of years. You have to build trust in these things, not send it out in a press release."

Zenith Infotech executives could not be reached for comment.