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A new Kudos looks ahead

Having survived financial problems and a management/employee buyout, London-based kiosk software developer Kudos Development Group predicts a bright future.

May 16, 2002

While it may appear to outsiders that Kudos Development Group is skating on thin ice, managing director Thor Ibsen sees changes at the kiosk software developer as a power play of positive moves designed to move the company forward.

In April, Kudos experienced financial problems that helped force a corporate restructuring. Ownership of the 13-year-old firm transferred from a group of investors and venture capitalists to a 10-person team of employee/owners. Though there was pain involved, Ibsen said, when a number of employees were let go, he believes Kudos can maintain its viability in the kiosk industry.

Ibsen, formerly a high-ranking executive at Ford Motor Co., left a secure position with the automotive company just over a year ago to take over the helm at Kudos, then known as Degasoft. Without doubt, it has been an eventful year in which Ibsen has led the company in a physical move from Iceland to London, through a round of venture-capital fundraising, and the introduction of an improved new product.

In an exclusive interview with KIOSKmarketplace, Ibsen said on May 7 that he expects Kudos to emerge from the events of April as a newly energized entity.

"This is a real positive event for all of us," Ibsen said. "We feel that at this point the company is completely unencumbered of a long, difficult history. We look forward to supplying our clients better now."

Thor Ibsen took the helm at Kudos Development Group in the spring of 2001 and has guided the company through a move from Iceland to England, product changes, and an employee buyout.

Kudos announced on April 21 that the company had emerged from a corporate restructuring. Company employees and management bought assets of the company for an undisclosed sum. The company had been owned by a combination of outside investors, company employees, and Norwegian venture capital organization Venturos Group.

"We have reorganized the business, there's no more to say than that," Ibsen said. "Our purchase has been ratified by the creditors and we're continuing. Â… Basically, the company has been purchased by the employees and directors.

"The employees bought all the trading assets -- software, brand name, and continuing contracts -- from the old company," he added.

Kudos will maintain its offices in London. The company was forced to release a number of employees, though Ibsen would not say how many. In an April, 2001, interview with KIOSKmarketplace, Ibsen said eight families would move from Iceland as part of the company's shift to London. At the time, he expected the company to add 40 new employees in 2001.

"We have retained all key employees, but have had to make some cuts," he said. "We're a close-knit group of about 10 people right now."

Citing confidentiality agreements, Ibsen would not reveal the extent of Kudos' debt at the time of the restructuring. He also did not say how much the employees paid to purchase the company's assets or Kudos' current level of funding. Revenue figures were also unavailable; the company traditionally does not reveal those figures.

An unfolding story

The corporate restructuring is just the latest in a series of dramatic moves involving the company.

Ibsen joined the company, then known as Degasoft, from Ford Motor Group, where he was chief Internet activist, on a full-time basis in June, 2001. Shortly thereafter, the company and most of its employees relocated from Reykjavik, Iceland, to London (See story: KioskCom exclusive: Changes in the works at Degasoft). One person who did not make the move was former Degasoft managing partner Gunnar Hansson, though he approved the move and remained on the company's board.

Last July, the company received $3 million in funding from Norwegian venture capital company Venturos Group. In return, Venturos was given two seats on the company's board and assumed an ownership stake of just under 20 percent (See story: Degasoft's $3 million in VC funding to boost Kudos biz). Last October, the company changed its name to Kudos Development Group, giving it a strong identity with its foundation kiosk management software product. (See story: New software, name for Degasoft)

But financial problems dogged Kudos, and in early April the company sought liability protection. Ibsen said market factors played a role in the company's struggles.

"It is no secret that the world economy has been difficult on the market; it's delayed purchases," Ibsen said. "Kudos has had a long history of investment and liability. It reached a point where we could no longer handle the liability."

Venturos and Hansson have both exited the company. Asked to comment on Venturos' departure, Ibsen said: "Venturos is a great company. They saw the market go through a difficult period. We think very highly of them."

Venturos would not comment on its relationship with Kudos. Arnstein Wee, Venturos investment manager, referred any inquiries to Ibsen.

Hansson, reached on May 9 in Reykjavik, where he is now managing director for Iceland-based underwater technology developer Hafmynd, said he was "no longer on board" at Kudos and referred any additional inquiries to Ibsen.

Client retention

For any company that goes through a financial or corporate restructuring, the most difficult step in the immediate post-restructuring period is convincing clients that the company remains viable. In the kiosk industry, home to a healthy number of software development firms, Kudos faces competition from other companies while convincing current and future customers that it can continue as an entity.

Ibsen said the company is aware that it must rebuild client confidence.

"At this junction we're keeping our options open. We're a strong business with a strong team," he said. "We continue to supply various kiosk projects and customers. We've seen a turnaround in the market and more of a shift to media solutions in interactive settings."

Kudos is working to maximize its potential by expanding its focus. The company's flagship remote management package was enhanced last fall with the introduction of kiosk content creation software that was demonstrated at the KioskCom Europe show in London.

By creating software that has applications on the front and back end of kiosk projects, Kudos has expanded its capabilities. It has also created a potentially difficult situation with the content development companies it works with. One such company is Uovo, the British design and development firm that partnered with Kudos and Scottish kiosk manufacturer ePOINT Ltd. to create Virgin Records' line of V.Shop retail kiosks.

But Justin Lord, media and partner relations director for Uovo, gave Kudos an endorsement, saying the firm planned to work with the company in the future.

"We've worked with Kudos on three projects. We've gotten to know them very well and have the utmost regard for their skills," Lord said. "They've kept us in the loop about their difficulties. We think (the corporate restructuring) is absolutely the right thing to do and we wish them every success. Our hope is that we can continue to partner with them."

Lord also said Kudos' product expansion should not affect the Uovo-Kudos relationship.

"We've got no problems with their strategy, in particular on content distribution," he said. "It fits very well with our solutions."

Quite possibly the most significant client Kudos must retain in the months to come is Marconi Interactive Systems. Kudos entered into a strategic partnership with the communications and technology deployer last October (See story: Marconi rings up Kudos for software); two months later, Marconi entered into a deal with British Telecom (NYSE:BTY) to develop a system of Internet payphone kiosks that could grow to as many as 28,000 units by 2007.

Roy Jackson, Marconi chief technology officer, said the company will honor its arrangement with Kudos, but has taken preventative steps in case Kudos goes out of business as a matter of business necessity.

"We certainly intend to continue working with Kudos on an ongoing basis. We've been very pleased with their service," Jackson said. "We were aware Kudos could have some issues and we put some contingency plans in place. We'll continue to have them in place, but we'll continue to support Kudos and have confidence in what they're doing."

The crystal ball

In Ibsen's view, Kudos' restructuring is a time for a celebration of sorts. After struggling for several years to establish the company's credentials and dealing with issues surrounding the move to London, the company is now poised to move ahead. Moving ahead also means expanding outside the kiosk industry in the long term.

"At this junction we're keeping our options open. We're a strong business with a strong team," he said. "We continue to supply various kiosk projects and customers. We've seen a turnaround in the market and more of a shift to media solutions in interactive settings."

To Jackson, the Kudos story provides the kiosk industry with a cautionary tale, even as the company moves beyond its financial problems and the current worldwide economic woes diminish.

"All the players in the industry at the moment have to watch the till," he said. "There's a lot of opportunities out there, but it's been slow going. You have to keep your costs low."