CBS

July 1, 2001

Landis Group N.V, (A)

The case was Mr. Paul E. Kuiken, Chairman and Chief Executive Officer of
developed by
Professor Per V. the Landis Group N.V., was feeling the heat. Not just because
Jenster of the the Dutch summer felt unusually hot in the firm's headquarter,
Copenhagen Business
School, with the
this afternoon on June 27, 2001, as the CEO was discussing
assistance of Mr. the business with his visitors. Paul Kuiken knew that it was
Birger E. Dudek and time to rethink the business he started eleven years ago.
Ms. Stine J. Andersen
and grateful
contributions of the Recent results suggested that the information and
Landis Group.
communications technology (ICT) business was changing at a
The case was rapid speed; becoming more global, shifting technology,
developed as a basis consolidating customers, and certainly increasing competition.
for classroom
discussion rather than After more than five years of annual revenue growth rates of
to highlight effective up to more than 200%, the first quarter of 2001 had shown
or ineffective
management of
less encouraging signs of the emerging mayhem of the
administrative industry, and causing Landis' stock to drop more than 50% in
situations. Some facts the first six months of 2001.
have been disguised to
retain proprietary
rights. The large telecommunications companies had slowed their
investment spending, suggesting that sales were going to be
hard to come by, let alone grow. In addition, the suppliers of
ICT hardware were trying to off-load as many products to its
upstream partners (to be able to show sales figures in their
quarterly reports), leading to bursting inventories for
distributors such as Landis. It had even been necessary for
local police to prevent lorries off-loading goods which had not
been ordered.

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Although it was known that Paul Kuiken thrived on challenges and change, would it be possible
for him to transform the Landis Group and its performance? How should he convince the stock
market about the makeover? How should he sway the customers and Landis' business partners of
the new path? And how should he persuade his staff that their old ways would be insufficient in
the future? --- These questions called for cool thinking and hard decisions.

THE LANDIS GROUP N.V.

Landis Group is a Dutch full service organization active on the European ICT market. Landis
provides an assortment of specialized solutions, services and training programs in the field of
network infrastructures for speech, data and image applications, Internet-based application
platforms and the necessary security systems for all these. Landis has some 3,500 employees and
has branches in the Netherlands, Belgium, Germany, France, the United Kingdom, Sweden,
Denmark, Norway, Austria and Spain. The company works with leading suppliers such as Avaya,
3Com, Cisco Systems, Ericsson, Hewlett Packard, Lucent Technologies, Microsoft, Nokia, Nortel
Networks, Novell, Oracle, Siemens, SUN Microsystems.

FROM SMALL-CAP CONTENDER TO LEADING EUROPEAN ICT

COMPANY
Paul Kuiken, originally a graduate in electrical engineering, had taken an MBA from Amsterdam
Business School, and was working as a change manager in a management development company.
One day, he had had enough and decided that he would “…never work for a boss anymore”. Thus
in 1990, he founded Landis together with an experienced group of individuals specialized in
wholesale marketing and network technology. They built the company as a dedicated Value Added
Distributor of network equipment and focused on pre-sales and after-sales service by creating a
European organization designed to support its customers by adding value through technical
expertise and excellent customer service.

It was a time when gross margins in the Value Added Distribution (VAD) business were as high as
26%, and Landis opened new subsidiaries in Belgium, Germany and France in 1994, 1996 and 1997
respectively, which initiated the remarkable growth that Landis had experienced since its
foundation. In 1997, Landis also started implementing an aggressive acquisition strategy resulting
in a series of acquisitions (Exhibit 2) that contributed significantly to Landis’ growth, but also
posed a serious organizational challenge.

But Landis did not only expand geographically – the company also expanded its range of activities.
One of the new areas of business was training. To bridge the increasing knowledge gap in the fast-
growing ICT market, Landis opened its first educational training center in 1997. Landis ICT
Training was an educational institute that provided courses to European resellers and their end-
users. Another new division established in 1997 was Landis ICT Facilities that leveraged its
services in finance, logistics, purchasing and other operational services to all Landis subsidiaries
with a new and experienced management team.

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In 1998, the youngest division of the Landis Group N.V. was established. Landis ICT Services
provided specialized engineering and consulting services to Landis’ reseller partners in the
European market.

Landis continued its remarkable growth opening new subsidiaries in Austria, Denmark, Norway,
Spain and Sweden in 1999, and acquired one of its main competitors in the UK, Ilion. In 2000,
Landis made a strong shift in strategy to focus more on services at the expense of the VAD business
area. As a result of this strategy shift, Landis acquired Detron – a leading Dutch telecom
infrastructure services provider.

However, being a company strongly focused on technology and depending on especially telcos,
Landis was not unaffected by the current storm over the world economy as a whole and specifically
over the technology and telecom sectors. Especially the VAD business area had been hit hard and
Landis had lost more than 50% of its value on the Amsterdam Stock Exchange the first six months
of 2001 alone (more about this in a later section).

ADDING VALUE TO HARDWARE AND SOFTWARE

Landis’ operations could be divided into two main categories, products and services. Till recently,
the focus had been on VAD of mainly networking technology. Though the VAD business still
contributed most of the revenue - 78% of 2000 revenues (Exhibit 9) - Landis was shifting its
attention to services and to its role as a high-end systems integrator offering a single point of
contact for a complete solution. Landis divided its operations into four business areas:

1. Business Partners
This was the products or VAD part of the Landis business. Landis was Europe’s leading VAD
player and a main partner for major manufacturers of hardware and software like Cisco, Nortel,
Lucent, Sun Microsystems, and Oracle, and functioned as a sort of advanced wholesaler of data
networking, telecommunications, data security, systems and servers, and data storage, data
warehousing and archiving products. Basically, the Business partners were distributors of
everything from intranet infrastructure and tele towers to switchers and cables. They purchased the
hardware and software from their suppliers and resold it, adding value to the products by offering
engineers, consultancy and training, to a broad range of vendors who targeted small and medium
sized enterprises. Thus the product portfolio was extensive, but the products were very price
sensitive and the margins in this business area are in the low end of the scale (gross margin was
11.3% and EBIT margin 4% in 2000), making this business area rely on high volumes. The cash
flows in this business area were small but steady amounts of income each month and with a high
turnover rate. However, the economic crisis had a large impact on the cyclically sensitive demand
for network technology slowing volume growth considerably. One important reason was that
demand from new carriers, ISPs and dotcoms had almost completely dried up, and consequently
stock levels had built up in the reselling channel resulting in pressure on reselling prices and thus
gross margins. Landis had tried to renew this business area by introducing an Internet hardware
portal. The attempt nevertheless failed.

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2. Public Networks
In this business area Landis provided telecom related IT hardware and services to telecom
operators. Furthermore, Landis had exploited the outsourcing trend and has a 42% stake in a joint
venture with Crown Castle Benelux that is a real estate organization buying antenna systems from
carriers and renting back antenna capacity to not only one but all the main carriers. The package
included capacity, management and maintenance. A huge opportunity for Landis lied in the
expected roll out of the UMTS networks in the coming years, and Landis had already secured an
order for T-mobile’s new Mobile telephony Network in the eastern region of Germany. The order
for UMTS infrastructure, worth EUR 18 mio, required full “Turn Key” services including site
acquisition, planning, construction, and provisioning for the radio stations enabling a full
operational hand over to network operations at T-Mobil, a Deutsche Telekom owned operator.

In this area, the lion’s share of the revenues were generated by services resulting in an above-
average gross margin of 64% in 2000 and an EBIT margin of 8%. Nevertheless, the public networks
business faced difficult market circumstances. The telecom companies had spent huge amounts of
money acquiring the UMTS licenses and in light of the global economic slow down that had hit the
telecom sector hard, the operators were now confronted with serious cash constraints. The present
absence of interest in telecom stocks and heavy debt burdens incurred from buying the UMTS
licenses made it very hard for telecom operators to raise new capital to finance the roll out of the
UMTS networks. Furthermore, telecom operators, faced with cash constraints and debt burdens,
were forced to initiate extensive cost cutting measures. As an example of this, one of Landis’ main
customers, the Dutch telecom operator KPN, was implementing a harsh reorganization plan to make
a large part of the thousands of external staff redundant.

In spite of this, Landis’ management remained positive about the development of its telecom related
services. Landis had a strong foothold in Benelux and Germany and had a good chance of scoring a
least one of the Dutch UMTS contracts. Moreover, the fact that the telecom operators were having
major financial problems at that moment could also be interpreted as an incentive to trim the costs
of rolling out the UMTS networks by resorting to increased outsourcing, which would benefit
Landis. However, Landis’ strong foothold in telecom did not reach beyond Benelux and Germany,
which could prove to be a threat to Landis’ growth in this business area.

3. Enterprise Networks
This business unit supplied larger enterprises with network services, support and infrastructure for
voice and data networks, and the company offered one of the best broad combinations of services
and products, both nationally and internationally. Like in Public Networks, the larger part of
revenues originated from services and the margins were roughly the same. This business unit was
also marked by the economic slow down, as enterprises postpone network investments.
Nevertheless, Landis had seen some growth in revenues, partly due to the acquisition of Detron,
although some of the low-margin activities had been divested.

4. Training
Landis training activities was the smallest of the four business units, contributing only 3% of 2000
revenues, but it was also the most profitable with a gross margin of 78% in 2000 and an 18% EBIT
margin. Landis was one of Europe’s most important providers of network specialist training and
after the acquisition of Ilion, Landis’ training facility became the second largest in Europe, only

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marginally smaller than the market leader. The demand for skilled IT workers in Europe was
soaring; hence this business unit holds tremendous growth potential for Landis. Nevertheless, the
business unit had in 2001 ceased to exist as an independent business unit. It had been integrated
with Enterprise Networks, since the services offered by Training to a wide extent supplemented the
integrated network solutions offered by Enterprise Networks.
Within the public networks – and enterprise networks business area, Landis was very based on
projects with a work force consisting of highly skilled Landis engineers. The projects spanned from
setting up cables inside and outside buildings, to setting up relay towers for mobile telephony.
These projects often ranged in the area of 100 million euro and provided Landis with huge margins.

LANDIS HAD A WIDE CUSTOMER PORTFOLIO

Landis’ customers ranged from small garage Internet start-ups to the huge royal KPN, and sold
everything from cheap routers to million euro projects.

Landis had three main customer segments

1. Public Networks (mainly telecom carriers)
2. Enterprise Networks
3. Business Partners.

1. Public Networks
What dominated the European telecom industry was consolidation. In the European market all the
mobile carriers were owned by one of the top five carriers all of which were Landis customers.
These large carriers were British Telecom, France Telecom, Deutsche Telekom, Telefonica in Spain
and Dutch KPM. These carriers were likely to survive while the minor ones would be taken over.
Thus when the large carriers consolidated and acquired, the Landis business would grow even
faster.

2. Enterprise Networks
In the enterprise networks segment, Landis was focusing on the large enterprises as these generated
the highest value. In today's hyper competitive business environment, enterprises do not have the
luxury of focusing resources on a piece of the business that is not a core focus. Rather, they let
others handle the more mundane tasks, and focus resources on strategic initiatives that will have
more impact on the company's bottom line.

At Gorman Richardson1, architects were focused on designing buildings, not telecom strategies. "I
have found that we don't have the time to invest in learning how to build and manage solutions, so
we need the assistance of a provider," Gallivan, employee at Gorman Richardson, said. "In some
cases, we have simply looked for guidance and advice from our vendors. Other times, it has been a
full installation and purchasing of equipment, as well as ordering communication lines - essentially,
managing the project." Like most enterprises, Gorman Richardson also used a hosting firm to
manage its Web server.

1
Gorman Richardson Architects, Inc. in Hopkinton, Mass., which had 100 employees, offered a broad range of services
including pre-design services, such as site selection and master planning and a strong core of comprehensive
architectural and interior design services. Example of services were, 3D site models, creating secure-FTP websites &
project websites, develop design program tailored to customer needs.

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3. Business Partners
The Landis business partners did 60% of all sales. They started out in distribution and wholesale
and today they were specialized in data networking, telecommunications, data security, systems and
servers, and data storage, data warehousing and archiving products. Despite the small margins, the
numerous business partners were vital to Landis’ business. They provided access to end-users and
their clientele was enormous. These two arguments made Landis appealing to large suppliers like
Cisco, who saw great potential in using Landis as a portal to the many customers. For instance it
was through the business partners that Landis was the first to sell DSL with the telecommunications
company KPN. KPN went through Landis to market.

LANDIS - FIGHTING IN AN EXTREMELY COMPETITIVE MARKET

Among Landis’ main competitors were Getronics, Azlan, Telindus, Dimension Data, PinkRoccade
NV, LCI NV and KPNQwest NV. However, it was difficult to compare Landis with other
companies. Azlan was now predominantly a hardware supplier. Getronics had much for focus on
standard IT services. Telindus had both product and services revenues. During 2000 Telindus had
higher revenue growth than Landis in products, but this clearly impacted its margins. Both Azlan
and Telindus were likely to show growth in 2001. Evaluated by almost any ratio, Landis was
cheaper than these peers, whereas both their EBITDA and EBIT margins were among the highest.

Network Service Providers

Network Service Providers deployed a Wide Area Network (WAN) on which they offered
telecommunication services. Providers could be separated into national (Energis, Versatel) and
international (KPN-Qwest, AT&T/BT/Iginite, Worldcom/UUNet, Global One/Equant).
Competition was only expected from the providers with whom Landis Network Services (LNS)
could not agree a business alliance agreement.

KPNQwest NV
The Company's principal activities are the delivery of a range of carrier and corporate networking
solutions, hosting and Internet services across a 15 country European footprint. The Company owns
and operates EuroRings, a European fiber-optic system, which connects 50 cities and a network of
hosting facilities, the KPNQwest CyberCentres. Communication services accounted for 92% of
2000 revenues and infrastructure sales, 8%.

ICT outsourcing companies

ICT outsourcing companies (IBM, EDS, HP, Dimension Data, Getronics, Atos/Origin, etc.) took
over and managed the entire ICT environment (incl. Network services) of customers. The target
market was mainly large multinational companies, which were not the market LNS (Landis
Network Services) was focusing on.

Getronics
Getronics is one of the world's leading providers of Information and Communication Technology
(ICT) solutions and services to professional users of ICT.
With 30,000 employees and a direct presence in over 35 countries, Getronics works with many of
the world's largest companies to help them maximise the value of their technology investment.

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Getronics is headquartered in Amsterdam, with regional head offices in Boston, Singapore and
Washington DC. Getronics shares are traded on the Amsterdam Stock Exchange (see also Exhibit
4).

Dimension Data
Dimension Data is a rapidly expanding global connectivity and integration services Group,
operating in over 30 countries on 6 continents. Founded in 1983 as a specialist supplier of
networking technology and services, the Group’s strategy has evolved in parallel with the
emergence of the intelligent network as the single most important enabler in business today.
Complete connectivity and integration are fundamental components to achieving success in the
global market place. Historically, information technology integrators have focused on either
network infrastructure or applications integration. Dimension Data is already a world leader in
providing network infrastructure solutions to global corporations. The Group has a global
workforce whose range of technical skills and geographical coverage are unrivalled.

PinkRoccade NV
The Company provides information and communications technology services to the manufacturing
industry, the banking and insurance sectors and the public sector. Its services are based on two core
competencies: Infrastructure Management (setup, management and security of IT infrastructures)
and Application Services (development, maintenance and support of IT applications). Application
services accounted for 53% of 2000 revenues and infrastructure management, 47%.

LCI Technology Group NV(LCI)

Formerly known as LCI Computer Group NV. Involved in the field of information technology and
related services. Provision of products and support to major institutions as well as to the
government, including video conferences, network connectivity, software development, wireless
communication, document management, integration, sales, services and facility management.
Services, Integration & New Technology accounted for 85% of fiscal 2001 revenues and software
& Consultancy, 15%.

Azlan Group PLC.

Provides network computing products and associated training and services. During 2001, the Group
acquired Italian network service company. Product business accounted 89% for fiscal 2001
revenues, Training business, 8% and Services business, 3%.

Small ICT-solutions Providers

Small ICT-solutions Providers (Brocom, Breese, etc) focused on small- and medium enterprises.
Through agent-agreements with local network providers they could be competitors of LNS.

Network Service Integrators

Network Service Integrators (Vanco, Genuity, Telindus, Networks unlimited, etc.) offered
integrated network solutions consisting of several elements like WAN design and provisioning,
network monitoring and security, consultancy, web-hosting etc. They pretended to be Network
Provider independent. Dependent on the portfolio of agreements with network providers
competition could be expected from NSI. At the present most of the NSI are not active in NL and
some own their own network.

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Telindus
Telindus Group NV is the Belgian parent company of Telindus, one of the leading European
integrators of data- and telecommunications networks. The Telindus group designs, installs,
secures, manages, audits and maintains a variety of fixed and mobile networks using local area
network LAN, WAN, Internet and Intranet technologies. The group also manufactures high-
performance modems and other network access products.
The Telindus group has about thirty subsidiaries in some ten European countries and an extensive
network of agents throughout Europe, South East Asia, South America, Africa and the Middle East.
Telindus' client base includes more than 50 operators and a broad spectrum across financial,
governmental and European institutions. The company is also proud of its prestigious
references in the sectors of industry, distribution and media.
In addition to the Telindus subsidiaries, Telindus Group holds approximately 5.1% of the share
capital in Mobistar NV, Belgium's second-largest GSM operator. These operations are wholly in
line with Telindus Group's strategy towards the future development of the network sector, in which
mobile and fixed networks will be further integrated (Exhibit 4).

Application Service Providers

Application Service Providers (Interpath, ASP4all, Vertis, QuayOne, Multrix, Siennax,
WebWindows, etc.) provided a contractual service offering to deploy, host, manage, and rent access
to an application from a centrally managed facility. ASPs might be competitors when they will
expand their portfolio with network services.

Gross
Sales (in Sales Profit EBITDA Earnings Days
Company Year 1000 Euro) growth Largest region Margin Margin [Link] inventory
Landis Group NV 2000 667.291** 3,7% France (31.3%) 12,0% 6,9% 3,6% 47
Landis Group NV 1999 8,2% 3,5% 1,5%
PinkRoccade NV 2000 649.766** 36,8% N/A 37,1% 14,4% 6,4% 7
LCI Technology Group 2000 256.846** 29,8% Other countries (92.9%) 17,0% 8,4% 3,4% 64
KPNQwest 2000 461.586** 142,6% the US (29.5%) 34,1% -26,3% -30,0% N/A
Getronics 2000 3586.227* 12,5% Eur., Mid.E., Afr.(65.4%) 22,1% 7,7% 1,5% 21
Telindus 2000 480.362* 63,7% Rest of EU (51.0%) 6,4% 6,0% 23,2% 58
Dimension Data Sep.2001 2371.499* 31,6% Asia (22.7%) 25,3% 7,7% -71,9% 20
Azlan Mar. 2001 579.749* 44,1% UK (87.0%) 18,1% 3,8% 1,9% 49

*1000 USD$ **1000 Euro

Finally, the competitive analysis showed that it was essential to have business alliance agreements
with the major business partners to have reach (national and international) and portfolio coverage.

THE VALUE CHAIN

The poor economic weather that had swept across the world had certainly affected Landis as well as
its competitors. The telcos were debt burdened from acquisitions and bids on third generation
mobile network licenses, and the economic downturn was only making things worse forcing them
to cut costs where ever they could. Companies were reefing the sails for the storm, and large IT
investments were often the first to be postponed, hence fewer orders for Landis.

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But the repercussions reached much further than Landis. The whole value chain from manufacturers
to end-users was hit hard. Landis worked with leading suppliers such as Avaya, 3Com, Cisco
Systems, Ericsson, Hewlett Packard, Lucent Technologies, Microsoft, Nokia, Nortel Networks,
Novell, Oracle, Siemens, SUN Microsystems, and they had quarterly sales targets to meet.
Therefore, all the major manufacturers were stuffing their channels at the end of the quarter to make
the numbers. As a result of falling demand and increasing supply, inventories were bursting with
goods, and in a few extreme cases, Landis had been compelled to call for the local police to prevent
desperate suppliers off-loading goods that Landis did not order.

Landis mission was “building satisfied business partners by offering high quality ICT products,
services and training for the electronic highway”. Since Landis defined the manufacturers as one of
the four types of business partners, this desperate situation put a serious strain on Landis’ ability to
satisfy the manufacturers and thus live up to the mission statement.

FINANCIAL HURRICANE
The remaining three types of business partners defined by Landis were customers, shareholders and
employees. The deteriorating macro-economic outlook was creating both threats and opportunities
for Landis' mission satisfying the shareholders.

Because of the low prices on technology stocks the ICT industry had experienced a considerable
consolidation and Landis had not refrained from exploiting the opportunity to grow through
acquisitions. In 2000 alone, Landis acquired four companies, the most important of those being
Detron Group N.V. However, one company seldom fitted completely into the structure and
organization of the next company, and thus Landis was facing an immense task of integrating the
acquired companies. As an example of these difficulties, 75% of all internal communication was
through e-mail, but until recently 44 different note systems to convey this communication existed
within Landis due to the numerous acquisitions. Landis had, nevertheless, been quite successful in
integrating the acquired companies though some of the acquired business units had to be divested in
the process.

The Stock Market and Investor Relations

The fuel for this high pace of acquisitions and the following restructuring and integration had
mainly been raised on the stock market, tripling the number of shares from 1999 to 2000.
Moreover, due to the high pace Landis was keeping, they were still in the process of developing
their investor relations, which were far from complete.
In the light of falling stock prices on tech companies, however, the effect of this massive emission
had been diluted, and Landis chose, in 2000, to strengthen its capital base by taking out a
subordinated convertible loan of 45 million Euro to be made available in installments. For more
details on this loan and its conditions see the box below.

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 Subordinated convertible loan
Loan amounting to Euro 45 million entered into with two US investors, of which loan the full amount has
been deposited with a banker on an escrow account. Euro 10 million has been received in 2001 and starting 1
April 2001 the remaining amount will be released in a maximum of 9 monthly installments.

The duration of the loan ends on 9 March 2005 and the interest amounts to 4% payable quarterly in arrears.
Landis Group N.V. has a choice to pay the interest in cash or in shares in Landis Group N.V.

The loan can be converted into shares during the whole duration. The conditions for conversion are detailed
as follows:
 Until and including 9 June 2001: Conversion rate is Euro 9.12.
 After 9 June 2001 conversion price is stock exchange price (weighted average of the lowest 3 stock
exchange prices during 10 days after a request for conversion) or lower conversion rate. If the stock
exchange price has been 25% higher than the conversion rate for longer than 20 days at a stretch the
entitlement to conversion against the lower conversion rate will be lost.
 Per month a maximum of 9.9% of the outstanding shares can be converted.
 If the stock exchange price of Landis Group N.V. decreases significantly, the maximum number of
shares that can be issued is limited to approximately 7 million and the remainder will be payable in
cash.

Source: Landis Annual Report 2000

Escrow: Property or money held by a third party until the agreed upon obligations of a contract are met.

Many investors and analysts viewed the nature of this convertible loan as a potential dilution of
their investment in Landis, since their relative share of Landis’ equity would be diluted should the
two US investors decide to convert the loan to shares. This risk combined with the fact that Landis
in the 2000 annual report did not give any projections or expectations regarding the coming
financial year amplified the effect of an already sour tech stock market. The price of Landis stock
took another drop and continued the downward trend.

But was the dramatic drop in the price of Landis’ stock justified (Exhibit 11)? A look through
various analysts’ report on Landis draws a picture of a basically healthy business, and the analysts
targeted Landis’ shares considerably above the market price. Landis exercised tight cost control
though inventory and debtors still strained the balance sheet. Landis was still, according to analysts,
too focused on the VAD business where margins were dropping and OEMs (Original Equipment
Manufacturer) increasingly were going directly for the end users. Landis was aware of the VAD
limitations and had introduced a strategy of becoming a “full service provider” moving focus away
from VAD. Nevertheless, investors did not seem to be convinced, possibly because of the difficult
market circumstances and the fact that Landis as a new entrant had not yet established its image in
the full service market.

There was a tendency, though, that the HSBC analysts were more positive towards Landis than their
Dutch counterparts. According to Landis CEO Paul Kuiken, the only analysts following Landis that
really understood the nature of the company were the analysts from HSBC. Not all investors agreed
with the HSBC evaluation of Landis. How should Landis convince doubting investors about the
potential of Landis’ business? Presenting growing revenue, net profit and EPS was apparently not
sufficient to convince the stock market. The dropping share price made it increasingly difficult to
raise capital to sustain the acquisition strategy as well as exposing Landis itself to the risk of
acquisition. Thus, it was imperative for Landis to tackle this problem of lacking confidence from
the stock market.

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GETTING THE RIGHT PEOPLE - A MAJOR CONSTRAINT
”We consider all employees essential to our mission. Only as a team can we realize our goals.” The
message stated in the Landis mission statement was quite clear – Landis’ most important assets
were the employees. This was especially true if Landis wanted to implement the strategy of
becoming a full service provider. However, getting the right people was a major constraint. Landis
had been so busy growing that it did not have the excess time or money to train and evaluate
managers. Furthermore, the competition for skilled IT workers was intense making it difficult for
Landis to recruit new employees. Thus, part of the rationale behind Landis’ acquisition strategy was
to curb this limited supply of skilled IT workers, and Landis had in fact been quite successful in
acquiring the needed brain power tripling the total number of employees from 1998 to 1999 and
again from 1999 to 2000.

Total number of employees at Landis

2000 1999 1998 1997 1996
3212 1150 338 178 96

Hence, Landis had acquired substantial knowledge about network, market, suppliers, marketing,
selling, delivery and Customer Care. But one thing was to acquire companies and take over their
employees – another thing was to integrate the new employees and make them stay.

With the acquisition of 12 different companies, Landis was facing the challenge of integrating a
number of different cultures. However, the attempts to integrate the various departments had not
developed as smoothly as hoped for. Some departments had a fear of opening up, which seriously
slowed down the integration process. This along with the fact that the departments had very
different ways of working (e.g. some had a very project based culture) made Landis less uniform.

When asked how the company was organized from a divisional point of view, Mr. Kuiken
answered: “We are organized around the technology; technology drives the growth of our company,
especially the complexity of the technology. If you look at both areas and the distribution, we are
the main partners for vendors like Cisco, Nortel, Lucent, Sun and Oracle; so it is completely
vendor-orientated; and around that strategy we offer added value like engineers, consultancy and
training. In the systems integrator organization it’s technology-based but it’s user-oriented. The
users ask for help and we translate that demand into user applications. After that we just offer the
user applications to the end users themselves.”

Coping with the explosive organizational growth that Landis was experiencing is a formidable
challenge for the company. On top of this, the company was going through considerable
organizational changes further shuffling the work force around. These organizational changes were
partly due to Landis’ acquisition policy and partly due to the beginning shift in focus from VAD
towards “knowledge products”. As a result, Landis had eliminated 85% of the employees in the
VAD business over the past 2-3 years (from 1400 to 173).

Not all Landis employees had been dedicated supporters of the changes and the resistance had
reached all the way into the top management. To keep the top management team heading in the
direction set by CEO Paul Kuiken, he had had to resort to harsh measures, e.g. introducing
“demotions” as opposed to promotions (which however failed). According to Paul Kuiken, the only

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way to turn around was “to remove some Eiffel Towers and small castles – I have closed down my
last two, only one is remaining”.

To motivate the remaining employees, Paul Kuiken used different kinds of means including money,
position, respect and education. The question was whether this was sufficient to retain the
employees, who were paramount to Landis’ success? Because of the tremendous growth, Landis
was not yet one company. Will the entrepreneurial spirit that had driven Landis' progress so far be
sufficient to glue the company together as it kept growing and growing? The current culture in
Landis was that there was no organization. One manager at Landis said that it was time to begin
thinking like a big company, albeit he did not specify what that implied. Paul Kuiken believed in
neither hierarchies nor matrixes, but how should the company then be organized to survive the
journey from small-cap entrepreneur to leading European ICT company?

The questions were numerous, and Landis faced huge organizational as well as human resource
challenges in an uncertain future.

AT THE CROSSROADS – WHICH PATH TO CHOOSE

The environment that Landis operated in was characterized by constant changes. The information
and communication technology was developing at a breathtaking pace, and so did the business
surrounding the technology. Software and especially hardware sales were subject to cutthroat
competition slashing margins. On top of that, OEMs were increasingly selling directly to the end-
users. This had altogether provoked a trend in the ICT business of moving towards services and
integrated solutions instead of “moving boxes”. All this demanded applying different tools to the
changing needs. When selling hardware, it was the customer, who owned the product in the end, but
when selling services it was Landis who owned the customer in the end. Landis had to stand up to
this challenge and apply new tools.

One of the attempts made was increasing the focus on Customer relations (CRM). Landis wanted to
focus and retain the loyal customers. Hence, a customer contact center was opened, which put
together sales operations with a helpdesk and a customer database. This was done, since after sales
services were the most difficult part of the sale.

The whole character of the competition would change from price competition to competing on the
value added to the products – typically in the form of integrated solutions including implementation
and training of the customers’ employees. The services could also enclose management of the
systems. The trend towards concentrating on core competencies and the difficulties in recruiting
skilled IT-workers had created a significant growth in the market for managed services (Exhibit 5).
Moreover, Landis was considering outsourcing its distribution, which included Landis’ business
partners all while figuring out where its strengths were lying. Were the business partners really a
part of the core competencies or would Landis be better off outsourcing them?

Chris VanLuling, director of business marketing at WorldCom, attributed the growth to the
worldwide challenge customers had in recruiting and retaining network management talent, and the
need to rapidly deploy new e-business applications reliably. VanLuling estimated that 15% to 20%
of WorldCom's customers bought managed network services today, and he predicted that the
remaining 80 percent to 85 percent would migrate to managed services over time.

12
Another growing service area was acting as trusted intermediary between the small to medium size
companies and the telecom carriers. Dan Gallivan, IT manager at Gorman Richardson Architects,
preferred to work with a solution provider that resold carriers' services, rather than do business with
the carriers themselves. "We are working with a vendor that manages all of our local phone and
long-distance lines, as well as our primary Internet link," Gallivan said. "We get personalized
account service and easy-to-reach reps, and we don't have to deal directly with Verizon
[Communications]. They provide more customer service and are more helpful than the larger utility
has ever been."

Another dominant feature of the ICT industry was consolidation, and acquisitions were almost daily
events in the industry. The big companies would get bigger and the small companies will either be
taken over or die in the fierce competition. Landis’ management had acknowledged this and had
signed the company up for the consolidation race. Landis got a good start with massive acquisitions,
but the circumstances in the financial market were straining Landis’ ability to keep the pace. To
stay ahead in the race, Landis needed to choose a path that would convince investors to put their
faith in Landis.

Having seen his visitors to the door after a very interesting discussion, Paul Kuiken sat down and
gazed at the setting sun. The temperature in the office had finally dropped to bearable levels, but
Paul more than ever felt the heat intensifying. Numerous thoughts and questions built up in the back
of his head. He knew that Landis had come to a crossroad, but which path should he choose? He
also knew that mere choosing a path would not make the difficulties cease to exist. On the contrary,
they would just be starting. In order to successfully walk the new path, Landis would have to
convince not only the investors that the chosen path is the right path, but all its stakeholders.
Organizational issues, marketing issues, financial issues and HR issues will battle each other for the
attention of the Landis management.

CEO Paul Kuiken and CMO Berry Clemens both saw managing the changes, internally as well as
externally, as the ultimate challenge for Landis. Paul Kuiken had shed blood and tears building the
business from scratch, nurturing it from infanthood till its present transition into adulthood. He set
out to build satisfied business partners – customers, manufacturers, shareholders, and employees.
But at the present course keeping all business partners satisfied is growing increasingly difficult,
and Landis has thus arrived at a crossroads where all paths require, at least short term, sacrifices
from both Landis and its business partners. Which path would be the best – quo vadis?

13
EXHIBIT 1
Summary of Business Areas by Landis

As previously stated in the case text, CEO Paul Kuiken did not believe in hierarchies, hence there
existed no traditional representation of the Landis organization. Externally, towards the customers,
Landis was organized in three divisions corresponding to the three business areas, namely Business
Partners, Enterprise Networks and Public Networks, but internally the company was organized
around a number of competencies and services delivered by nine divisions. The products and
services delivered by Landis to its customers in any of the three business areas were in most cases a
combination of products and services from multiple internal delivery divisions.

Current Services Delivery

UNITS DIVISIONS
Finance, Wireless Financial Services
Communication Leasing Rental U
N
I
Managed Services C
New Application Network Device
O
R
Interactive Media, Application Services N
Citee, QuayOne, Host (Oracle) Web Device
Internal ICT B
U
Education Services S
Citee, ICT Training Host / Data Network Device
I
N
Services & Professional E
Consultancy, Consultancy Network Mgmt. System Mgmt. S
Unicorn, Citee
Services
S
Mobile & Switching, Ass Telecom Services
& Staging, Wireless Mobile Fixed Satelite C
Comm., Engineering & O
Installation N
Technical Services S
Implementation Climate Energy U
L
T
Support Services
Support Field Support Helpdesk A
N
C
Logistic Services Y
Facilities Warehousing Assembly

Source: Landis Half-Year Report 2001

14
EXHIBIT 2
Acquisitions

Year Company Name Company Business

1997 Chip Technologies SA Distribution and service provider of data communication
networking products in France.
1998 Schneider und Koch Consultancy (SK-do-IT), Education (SK-Bildungszentrum) and
Distribution (SK Distribution) company specialised in data and
voice networking products.
1998 Ansacom B.V. Telecommunication distribution and service provider in the
Netherlands and Belgium.
1999 Dennis Bergstrom AB Distribution and service provider specialised in Data-, Voice- and
Storage networking products in Sweden, Norway and Denmark.
The take over includes a Network Security consultancy company.
1999 Ilion PLC Distribution (Ilion), service provider and educational centre (Ilion
Faculty) of data and voice networking products, UNIX/Linux
operating systems, Database and Storage products in Belgium,
Netherlands, Luxembourg, Germany, UK, France, Spain and
Austria.
1999 4U Group B.V. Technical educational centre (4U training), individual training
(IMT) facilities and detachment (4U Flex Partners) of networking
and operating systems specialists in the Netherlands.
2000 [Link] B.V. E-Solution Provider, [Link], a business-to-business Internet
portal based in Hoofddorp, the Netherlands, is focused on the
development, exploitation and support of E-commerce activities.
2000 7W&H 7W&H employs highly qualified business consultants who are
specialized in designing and managing data network
infrastructures. They are highly skilled and trained in network
topology and –technology, network architecture, cabling systems,
network protocols, ICT management, ICT security, Internet and
ASP.
2000 Detron Group N.V. Provides consultancy, design, implementation and operations &
maintenance services, for operators of both fixed and mobile
telecom networks, as well as for internet service providers and
carrier hotels. On the market for business networks Detron
provides integrated voice/data networks and services.
2000 Citee B.V. Citee has branches in Leidschendam and Rijswijk. The company
can be characterized as an ICT integrator for building, using and
exploiting of modern technology based on one stop shopping.
Main topics are outsourcing, IT migration processes and e-
business. The company has its focus on organizations with 100
users or more.

15
EXHIBIT 3
Management Team

The international management team consists of 4 chief officers and 5 vice presidents, with founder
and CEO Paul E. Kuiken at the top.

CEO: Paul E. Kuiken

CFO: John A. Bus
COO: Jean-Pierre Verhoeven
CMO: Berry A.P. Clemens
Vice President Business Partners: Willem de Haan
Vice President Public & Enterprise Networks: Rob van Straten

Vice President ICT Facilities: Peter Ligtvoet

Vice President ICT: Dick de Groot

Ing. Paul. E. Kuiken, Chief Executive Officer

Mr. Kuiken is the Chief Executive Officer of the Landis Group. He is a graduate of the University
of Technology. After studying electrical engineering he followed several management development
courses at Internatio Muller and Sony Netherlands. He also held a number of sales and marketing
positions at Suyver & Roosen, Sony Netherlands and Canon Netherlands. He continued his career
with managerial positions at Koning & Hartman and the Datel Group. Mr. Kuiken founded the
Landis Group in 1990.

John A. Bus RA. RE. , Chief Financial Officer

Mr. Bus is the Chief Financial Officer of the Landis Group. During his study of accountancy, Mr.
Bus worked for a number of auditing organizations, including Moret, Ernst & Young Accountants,
where he served as an EDP auditor for four years. After his graduation, Mr. Bus became responsible
for the department of internal audits and group coverage at OPG. In 1996 he joined the Landis
Group as Chief Financial Officer. He became a member of the Board of Directors in 1997.

Ing. Berry A.P. Clemens, Chief Marketing Officer

Mr. Clemens is the Chief Marketing Officer of the Landis Group. After completing his study at the
university of technology he worked as a product manager at Symplex Communications
Corporation. Since 1992 he has been working at Landis Group N.V. in different marketing jobs. Mr
Clemens was appointed as a member of the board of directors on 27 April 2000

Ing. Jean-Pierre Verhoeven, Chief Operations Officer

Mr. Verhoeven was employed by Cisco since April 1993 and held different positions. In his last
position of Vice President Cisco Northern Europe he was responsible for the Northern European
region, which consists of Sweden, Norway, Denmark, Finland, the Baltic States and the Benelux
countries. Prior to this role he was responsible for all sales, marketing and support activities of
Cisco Systems for the Netherlands as General Manager. Before 1993 Jean-Pierre Verhoeven held
several management jobs at Getronics.

16
EXHIBIT 4
Competitors

Getronics

Their mission: To enable their clients - both global and local - to meet or exceed their business
objectives by supplying and managing advanced, vendor-independent, ICT solutions and services.

What they do: Getronics combines the three distinct, but strongly linked, offerings of:

1. Business Solutions
Today all business is increasingly interconnected: from sector to sector, culture-to-culture and time-
zone-to-time-zone. ICT, and in particular the Internet acts as enabler to focus the business
relationship with customers, understanding their unique needs.
At the same time it enables organisations to link colleagues and partners together in an extended
virtual enterprise to deliver improved customer service.
Getronics has made this interaction, between the extended organisation and its customers, the focus
for the business solutions to clients.

2. Infrastructure Integration
The ICT infrastructure is not a monolith. It can’t be constructed once and last forever. It needs the
agility to adapt. Again and again and again.
NetWorkPlace™ is an integrated suite of services covering the complete technology lifecycle of
planning, deployment, management and maintenance.
Their philosophy is simple. Getronics believe that organisations should adopt a common operating
environment. That means common systems and support throughout. It’s an approach that
maximises value and performance and ensures that the company is always ready for change.

3. Managed Services
As ICT rapidly evolves, so the science of support becomes increasingly sophisticated. Rather than
playing a constant game of service “catch-up ”, many of Getronic’s clients choose to entrust the
management of their ICT infrastructure to Getronics.
Getronics managed services ensure on-site services, helpdesk, network and asset management – and
give the company control over the cost of ownership, so it never needs to compromise the ability to
do business.
Getronics have more than 200 regional service hubs, Getronics. They also operate Enterprise
Service Centres in Amsterdam, Houston, London and Sydney.
Getronics operate in:

Business continuity.
Configuration and installation services.
On-site and remote ICT and network management.
Outsourcing.
Software support and helpdesk services.
Logistics and warehousing.
Asset management and control.
Rollout and third-party maintenance.

17
Their vendor-independence: Getronics have alliances with many of the world's leading and most
respected hardware and software vendors and remain independent. This gives Getronics the
freedom to select the most suitable technology combinations for their clients.

Growth: Since their re-listing on the Amsterdam Exchanges in 1985, Getronics has adopted an
aggressive policy of expansion by means of internal growth, acquisitions and strategic investments.
Important criteria are high added value activities, scale, market orientation and a management with
proven skills.

Share price performance and market capitalization: The Getronics share price experienced a
turbulent year in [Link] share price decreased by 76%from € 26.40 to € 6.26 at year-end. In May
2000,Getronics instituted a 1:3 share split. The market capitalisation of Getronics by year-end 2000
was just over € 2 billion compared to € 9 billion at year-end 1999.

Dimension Data
Key Facts
 Dimension Data is a leading global network services and interactive commerce solutions
provider
 The Group employs over 12,000 people in over 30 countries on six continents
 Dimension Data raised $1.4bn in London last year
 Sales last year amounted to US$1.9bn with $319 million in sales from interactive commerce
 It has achieved a three-year compound annual growth rate in US dollars of 73% in revenue
and 36% in basic earnings per share
 Dimension Data has a blue chip client list, including: Citibank, Charles Schwab, Accenture,
Deutsche Bank, Virgin Mobile, Toyota, Telewest, Telstar and Cap Gemini Ernst & Young
 Dimension Data is already the largest independent network services integrator in the US
with annualized revenues approaching $600 million and 800 employees

PinkRoccade NV
During the first quarter of 2001, sales at PinkRoccade NV totaled 197.10 million Euro. This is an
increase of 31.4% from the 150.00 million Euro in sales at the company during the first quarter of
2000. PinkRoccade NV reported sales of 649.77 million Euro (US$564.52 million) for the year
ending December of 2000. This represents an increase of 36.8% versus 1999, when the company's
sales were 474.99 million Euro. Acquisition activity may have played a role in the sales growth:
PinkRoccade NV acquired Automatisering Sociale Zekerheid (Asz), Completion B.V., Tas Groep
Nv, 70% of Viper Communications Group (Australia) in 2000. This was the fourth straight year of
sales growth at PinkRoccade NV. PinkRoccade NV currently has 7,722 employees. With sales of
649.77 million Euro (US$564.52 million), this equates to sales of US$73,106 per employee.

LCI
On the 310.58 million Euro in sales reported by the company in 2001, the cost of goods sold totaled
266.05 million Euro, or 85.7% of sales (i.e., the gross profit was 14.3% of sales). This gross profit
margin is lower than the company achieved in 2000, when cost of goods sold totaled 83.0% of
sales.

18
The company's earnings before interest, taxes, depreciation and amortization (EBITDA) were 19.79
million Euro, or 6.4% of sales. This EBITDA margin is worse than the company achieved in 2000,
when the EBITDA margin was equal to 8.4% of sales.
In 2001, earnings before extraordinary items at LCI Technology Group NV were 8.85 million Euro,
or 2.9% of sales. This profit margin is lower than the level the company achieved in 2000, when the
profit margin was 3.4% of sales. Earnings before extraordinary items have grown for each of the
past 5 years (and since 1997, earnings before extraordinary items have grown a
total of 129%). The company's return on equity in 2001 was 29.8%. (Extraordinary items have been
excluded).

KPNQwest
KPNQwest NV reported sales of 461.59 million Euro (US$401.03 million) for the year ending
December of 2000. This represents an increase of 142.6% versus 1999, when the company's sales
were 190.24 million Euro. Acquisition activity may have played a role in the sales growth:
KPNQwest NV acquired Comm2000 (Italy), remaining 57.5% of Eunet Portugal
Telecommunicacoes Lda, remaining 49% of Aktsiaselts Data Telecom (Estonia), Simon Media
GmbH (Austria) in 2000. This was the third consecutive year of growth at KPNQwest NV. Sales of
Infrastructure Sales saw an increase of 195.5% in 2000, from 12.74 million Euro to 37.65 million
Euro.
Although KPNQwest NV is headquartered in the Netherlands, it derives most of its sales outside of
its home market: sales in the Netherlands were 86.20 million Euro, which was only 18.7% of 2000's
sales.
During 2000, the company's sales increased at a faster rate than all three comparable companies.
While KPNQwest NV enjoyed a sales increase of 142.6%, the other companies saw smaller
increases: PinkRoccade NV sales were up 36.8%, Landis Group NV increased 3.7%, and LCI
Technology Group NV experienced growth of 29.8%.

Azlan
Azlan Group PLC reported sales of £591.61 million (US$842.75 million) for the fiscal year ending
March of 2001. This represents an increase of 44.1% versus 2000, when the company's sales were
£410.60 million. This was the third consecutive year of growth at Azlan Group PLC.
In 2001, sales in Switzerland were up at a rate that was much higher than the company as a whole:
in this region, sales increased 108.1% to £14.36 million. Azlan Group PLC also experienced
significant increases in sales in Scandinavia (up 84.7% to £44.01 million) and Italy (up 70.8% to
£59.82 million).
Azlan Group PLC currently has 1,457 employees. With sales of £591.61 million (US$842.75
million), this equates to sales of US$578,412 per employee. Note that some of the figures stated
herein could be distorted based on exact classification of employees and subcontractors.

Telindus
Business overview: The strength of Telindus lies in the service oriented culture with technological
experts in alleviating congestion. More than 50% of the highly qualified personnel have a Master of
Science (engineering) degree.

The company has a strong financial condition with low debt and valuable equity holdings, a proven
ability to acquire, and 30 years senior management experience.
Telindus is organised in five competence centers.

19
 [Link] Access Products
[Link] Networking
[Link]
[Link]
5.e-Networking Solutions

Telindus’ Service Delivery Strategy is based on today’s best practice in network integration:
integration service management. It encompasses creating, planning, designing and implementing as
well as operating the secure enterprise network. Their Service Delivery Concept positions the
various modular services and describes how the service delivery is managed by means of service-
level agreements.
Telindus is a voting member of the ITU (International Telecommunication Union)
Telindus is a voting member of the ETSI (European Telecommunications Standards Institute)
Telindus is a member of FITCE-Belgium
Telindus is a member of BTA, the Belgian Teleworking Association.
Telindus is a member of the Belgian ATM Platform.
Telindus is a member of the ECTA - European Competitive Telecommunications Association.
Telindus is a member of the DSL Forum

1. Telindus Access Products: As a telecommunications equipment manufacturer Telindus designs,

produces, markets, and supports access products that are used by operators to deliver high-speed
access services to their customers over the local loop.

2. Enterprise Networking: Telindus is committed to delivering secured hybrid network

infrastructures. For many years now, Telindus has been gathering a vast amount of core know-how
in network design, planning building and servicing. Telindus delivers future-proof networks to
support legacy protocols, today's critical applications and tomorrow's multimedia implementations.

Telindus is committed to delivering secured network infrastructure. For many years now, it has
been gathering a vast amount of core know-how in network design, planning, building, and
servicing. Telindus delivers future-proof networks to support legacy protocols, today’s critical
applications, and tomorrow’s multimedia implementations.

Concerning technologies and products, the network infrastructure is built using a variety of
products, which may include hubs, workgroup and backbone switches, ATM switches, LAN or
WAN routers, adapters for Ethernet, fast Ethernet, gigabit Ethernet, token ring and ATM, and
remote-access equipment. Firewall, VPN, authentication, and encryption technologies are deployed
to ensure secure access to authorised users of the Internet and Intranets.

End-to-end and secured enterprise networks

 Switched Intranets and WAN backbone
 Integration of remote and mobile users into Extranets
 Mixing of legacy protocols with IP networks
 Voice-into-data network integration
 Intranet defence in function of security policy
 High-quality video transport
 Architecture and tools to make the network fully manageable
 Integration of directory information into intelligent networks

20
  Extensive professional services

Over the years, Telindus has installed hundreds of local, national, and international networks for a
wide range of clients in the banking, insurance, retail, governmental, telecommunications,
petrochemical and health-care worlds.

Telindus has long established strategic partnerships with key leading vendors of networking
products. 3COM, CISCO Systems and Marconi deliver the cornerstone infrastructure of their
networks.

3. Operators: With the foundation of the competence centre Operators, Telindus emphasises the
importance of the (r)evolution in the telecom market. With its experience and knowledge Telindus
is a strong partner for established and new telecom operators.

4. Services: Telindus based its services strategy on the notion that it should be completely
independent from any of the great 'vendor camps' product strategies. Telindus differentiates itself
through its services.

5. e-Networking Solutions: Within e-Business, Telindus is active in the areas, which are close to its
core networking competences, such as secure Internet and mobile applications, unified messaging
and directory services.

21
EXHIBIT 5

Technology Development

To date the personal computer (PC) has had a client-server relation through a Local Area Network
(LAN). The server drove the network, whereas the PC also contained intelligence or software.

It is expected that data processing and storage in the future will take place on central servers.
Connection between a PC and servers is made through the web: as it were, a client-host relation.
This development will affect the current PC industry and will contribute to the emergence of a new
type of service provider.

To enable this new type of service providing, investments are being made in an infrastructure of
hardware, software and know-how. As a result of this, complete system networks can be financed
and managed and mission critical applications can be made available to organizations for use
through the web.

Market Demands and Trends

There exists and increasing growth in electronic business, inter-company, intra-company, business
to business, business to consumer and consumer to consumer. It has become essential to have
networks and network applications in order to stay competitive and grow the business. Moreover,
companies are becoming aware of the importance of focusing on their core business and are thus
interested in outsourcing managed network services.

‘Managing network services is a management problem not a technology one.’ (Datamonitor)

Managed networks, and Managed WANs have existed for some time as an alternative to the
enterprise building out their own network. Many carriers are under pressure from plummeting
bandwidth prices, price erosion, and the commoditization of transport and connectivity. Telco's
have begun to realize that the key to retaining customers in an increasingly aggressive market is to
create new WAN services to allow customers to effectively outsource all of their WAN needs.
Today carriers are becoming less technology providers and more service providers.

Managed Service Provider - MSP

MSP is an outsourcing of business processes. The 4 major processes are Network Services (WAN
Market, portfolio, go to market, strategy, implementation, financial), Application Services, Desktop
services, and LAN services.

Landis Network Services - LNS

Landis Network Services selects and purchases best of breed wide area data network services from
Telecom Providers and integrate and combine these into customer solutions. Landis (re)sells these
service and solutions, as an independent party, into its target market, directly or via the Landis
Business partners. The objective of the LNS is to gain and keep loyal customers by delivering the
best choice of integrated network services, linked to E-commerce solutions that enable their
customers to reduce their risk, to grow their business and to stay competitive.

22
Application Service Provider - ASP
Mid-sized companies and those enjoying rapid growth are turning to Business Process Outsourcing
(BPO) of non-core functions. They need Enterprise Resource Processing software (ERP) to
streamline these processes but don't have the massive capital outlays in their budgets to purchase
programs like SAP or PeopleSoft. So they are turning to Applications Service Providers (ASP) to
supply a cost effective solution that can grow with their changing needs. The buyers are leaving the
training, installing, and upgrading of this software to them. The result: Buyers can reengineer their
business practices at a price they can afford.

Expect continued consolidation and attrition of ASPs over the next 12 months; say chief executive
officers and analysts. “The next 12 months will be turbulent,” predicts Joel Schleicher, CEO of
Interpath Communications Inc., a business applications and maintenance ASP in Raleigh, N.C.
“More ASPs will crumble because they don’t have the financial wherewithal to survive. In many
cases, it’s largely because they had flawed business plans that priced their customers under water.”
Resilient ASP industry emerges But that doesn’t mean there won’t be growth. After the inevitable
shakeout, a stronger and more resilient ASP industry will emerge, Schleicher predicts.
By then, ASPs will have clearly differentiated themselves from their competition, according to Gary
Steele, CEO of Portera Inc., a vertical service provider providing hosted software for the
professional services industry in Campbell, Calif. “But only companies with real efficiencies will
survive for the long haul,” he says. The foundation for these changes will be “educated costumers
who make fast buying decisions,” adds Jessica Goepfert, a senior analyst at IDC, a technology-
consulting firm in Framingham, Mass. “A purer ASP will emerge because there won’t be any
confusion about the services ASPs provide.” Adds Bill Martorelli, vice president of e-services and
sourcing at Hurwitz Consulting, also located in Framingham, “As the Web services movement
evolves further, there will also be new ASP business models and opportunities for vendors and
service providers. This means many intriguing possibilities for software vendors and service
providers.”

The industry can look forward to a “whole new breed of companies entering the market,” predicts
Jason Donahue, CEO and president of Telecomputing Communications Inc., a hosted applications
and Web services company in Fort Lauderdale, Fla. “Service providers such as telcos and hosting
companies with strong balance sheets and a history of providing reliable services will become more
prevalent as providers of hosted applications,” he says. “Expect greater acceptance of software as a
service beyond basic applications. Tomorrow’s software will do things today’s software can’t do,
such as linking together mail and voice systems and possibly tying in delivery components as well.”

Verticalization' ahead
“Verticalization” is the word Goepfert coined to describes a powerful near trend. “Customers will
be looking for ASPs that have expertise in their industry,” she says. “This will help ASPs deal with
the issue of customization.” In 2002, Goepfert sees the ASP market “bifurcating” into two
segments. “The first will serve large customers with complex operations and the second will have a
low-tech business model serving the lower-end consumer market,” she explains.

Over the next two years, mega-companies like Microsoft, Oracle and IBM will become increasingly
dominant, says Laurie McCabe, vice president of hosted applications and service providers at
Summit Strategies, a market research and consulting company in Boston. “That’s not to be
interpreted as bad,” she says. “What the ASP market lacked was credible ‘gorillas’ or bigger players
to strengthen the industry. They’re not going to obliterate everyone. In some cases, they’ll end up

23
acquiring or partnering with existing players. But, like the software industry, there will always be a
need for strong niche providers.” Along with growing niche markets, “the small-medium business
market will be embracing ASPs in a big way,” asserts Bruce Graham, CEO and president of
Interliant Inc., a hosting service provider in Vienna, Va. “More SMBs are saying they don’t want to
have an IT shop,” he says. “They are ready and willing to have ASPs deliver all their applications
over the Web. This will be a large and powerful market.”

Finally, the ASPs that will be around in three to five years will be offering simple and
understandable business models, forecasts Tom Kelly, CEO of BlueStar Solutions, an enterprise
outsourcing company in Cupertino. “Companies with complex business models will struggle and
most likely fall by the wayside because they’re all over the place,” he says. “But companies that are
focused on doing one thing well stand the best chance of being very successful.”

Many companies are entering this new form of business. It is, however, important to keep in mind
that MSP activities require very different capabilities of personnel.

24
EXHIBIT 6

Consolidated Balance Sheet

(after profit appropriation in EURO * 1000)
Source: Landis Annual Report 2000 and Interim Report 2001

ASSETS
30/06 2001 31/12 2000 31/12 1999
FIXED ASSETS
Tangible fixed assets
Other fixed assets N/A 21.792 12.005

Financial fixed assets

Unconsolidated group companies N/A 7.226

Total fixed assets 20.523 29.018 12.005

CURRENT ASSETS
Inventories
Stock N/A 62.656 69.818
Work in process N/A 13.229
Total inventories 68.972 75.885 69.818

Receivables
Debtors 168.798 197.454 119.355
Other receivables and prepaid amounts 77.903 92.281 13.333
Total receivables 246.701 289.735 132.688

Cash 1.838 824 1.101

Total current assets 317.511 366.444 203.607

Total assets 338.034 395.462 215.612

NB: Outside observers estimate that approximately 80% of the total assets pertain to the VAD business.

EQUITY AND LIABILITIES

30/06 2001 31/12 2000 31/12 1999

Shareholders' equity 67.886 64.623 60.028

Long-term liabilities
Subordinated (convertible) loans 46.040 46.986 3.120
Total Guarantee Capital 113.926 111.609 63.148

Provisions 1.542 6.795 2.182

Current liabilities
Banks 144.956 172.658 38.043
Trade creditors 59.254 80.043 88.440
Taxes and social security charges 1.923 7.894
Other liabilities 18.356 22.434 15.905
Total Current Liabilities 222.566 277.058 150.282

Total Shareholders' Equity and Liabilities 338.034 395.462 215.612

25
Exhibit 6 continued

Consolidated Balance Sheet

(after profit appropriation in NLG)
Source: Landis Annual Report 1998 and 1997

ASSETS
31/12 1998 31/12 1997 31/12 1996
FIXED ASSETS
Intangible fixed assets
Goodwill 4.310.871 3.351.008 85.590

Tangible fixed assets

Other fixed assets 6.774.265 3.954.995 807.148

Total fixed assets 11.085.136 7.306.003 892.738

CURRENT ASSETS
Inventories 64.408.230 31.182.142 11.390.125

Receivables
Trade receivables 109.635.640 45.526.168 25.311.065
Other receivables 13.863.795 4.316.060 3.059.122
Total receivables 123.499.435 49.842.228 28.370.187

Cash at banks and in hand 2.152.656 2.340.062 41.265

Total current assets 190.060.321 83.364.432 39.801.577

Total assets 201.145.457 90.670.435 40.694.315

EQUITY AND LIABILITIES

31/12 1998 31/12 1997 31/12 1996

Shareholders' equity 87.014.958 11.622.357 4.580.637

Minority interest 106.096

Long-term debt
Subordinated loan 9.375.000 10.000.000 1.000.000
Total Liability Capital 96.389.958 21.622.357 5.686.733

Provisions
Deferred tax liabilities 240.817

Current liabilities
Banks 16.704.003 22.457.788 9.462.828
Trade creditors 65.265.675 38.732.744 20.329.553
Taxes and social security liabilities 18.308.713 6.281.307 3.776.458
Other liabilities 4.477.108 1.576.239 1.197.926
Total Current Liabilities 104.755.499 69.048.078 34.766.765

Total Shareholders' Equity and Liabilities 201.145.457 90.670.435 40.694.315

26
EXHIBIT 7

Consolidated Profit and Loss Account

(in EURO * 1000)
Source: Landis Annual Report 2000 and Interim Report 2001

1st half 2001 2000 1999

Net sales 388.947 667.291 643.205
Cost of sales 291.790 498.604 548.341
Gross margin 97.157 168.687 94.864

Operating costs
Salaries N/A 74.578 33.789
Social security charges N/A 12.137 7.940
Pension costs N/A 2.109 711
Depreciation N/A 7.043 3.433
Other operating costs N/A 33.648 30.014
Total operating costs 76.217 129.515 75.887

Operating result 20.940 39.172 18.977

Net financial costs 5.822 4.412 3.453

Result from ordinary operations before taxes 15.118 34.760 15.524

Taxation 2.663 10.564 5.629

Result from ordinary operations after taxes 12.455 24.196 9.895

Extraordinary income and expenses after taxes N/A 715 -3

Result from investments N/A -197

Net profit 12.455 24.714 9.892

27
EXHIBIT 8

Consolidated Cash Flow Statement

Source: Landis Annual Report 2000 and 1998

(in EURO * 1000) (in NLG)

2000 1999 1998 1997
Operating activities
Operating result 39.172 18.977 21.976.946 9.391.058
Adjustment for depreciation 7.043 3.433 2.053.320 759.975

Changes in working capital

Change in inventory -6.067 -1.855 -33.226.088 -19.792.017
Change in receivables -112.047 11.172 -73.657.207 -21.472.041
Change in current liabilities (excluding banks, taxes
and interest) -1.868 -7.917 38.677.503 19.132.261
Change in provisions 4.613 -7.452 0 0

Cash flow from operations -69.154 16.358 -44.175.526 -11.980.764

Balance net interest paid and received -4.412 -3.453 -3.598.040 -1.326.937
Taxes paid -23.482 -7.309 -3.602.070 -1.025.223

Cash flow from operational activities -97.048 5.596 -51.375.636 -14.332.924

Investment activities
Additions and disposals in tangible fixed assets -16.830 -9.197 -4.099.093 -3.723.299
Investment in intangible fixed assets -1.464.703 -3.294.352
Acquisition of group companies 0 -57.157 -259.901 -155.589
Other -281 0 -8.756 0

Cash flow from investment activities -17.111 -66.354 -5.832.453 -7.173.240

Financing activities
Change in subordinated loan -1.134 -1.134 -625.000 9.000.000
Change in banks 134.615 8.294 -5.753.785 12.994.960
Shares issued 79.647
64.004.468 1.810.001
Other changes in shareholders' equity -20.116 -29.003
Exchange rate differences 517 506 -605.000 0

Cash flow from financing activities 113.882 58.310 57.020.683 23.804.961

Net cash flow - net change in cash in the

balance sheet -277 -2.448 -187.406 2.298.797

28
EXHIBIT 9
Revenue and Margin Charts

R e ve n u e fro m p ro d u c ts 2 0 0 0 , % p e r c o u n try R e ve n u e fro m s e rvic e s 2 0 0 0 , % p e r c o u n try

12% 3%
21% 17%
6% N e th e rla n d s
N e th e rla n d s
UK
UK
F ra n c e
12% F ra n c e
12% G e rm a n y 14% G e rm a n y
B e lg iu m
63% B e lg iu m
R es t of E U
3%
S ourc e: Landis A nnual R eport 2000 S o u rc e : L a n d i s A n n u a l R e p o rt 2 0 0 0
37%

R e ve n u e 2 0 0 0 , % p e r b u s in e s s u n it G ro s s m a rg in 2 0 0 0 , % p e r b u s in e s s u n it

7% 3% 7%

12% 18%
B u s in e s s p a rtn e rs
42%
P u b lic n e tw o rks
B u s in e s s p a rtn e rs
E n te rp ris e n e tw o rks P u b lic n e tw o rks
T ra in in g E n te rp ris e n e tw o rks
T ra in in g
78%
S o u rc e : L a n d i s A n n u a l R e p o rt 2 0 0 0 33% S o u rc e : L a n d i s A n n u a l R e p o rt 2 0 0 0

G ro s s m a rg in , % p e r b u s in e s s u n it R e v e n u e , % p e r b u s in e s s u n it
100% T ra in in g 100% T ra in in g

80% 80%
E n te rp ris e E n te rp ris e
60% n e tw o rks 60% n e tw o rks
40% P u b lic n e tw o rks P u b lic n e tw o rks
40%

20% 20%
B u s in e s s p a rtn e rs B u s in e s s p a rtn e rs
0% 0%
2000 1 s t h a lf 2 0 0 1 2000 1 s t h a lf 2 0 0 1
S o u rc e : L a n d is A n n u a l R e p o rt 2 0 0 0 a n d In t e rim R e p o rt 2 0 0 1
S o u rc e : L a n d is A n n u a l R e p o rt 2 0 0 0 a n d In t e rim R e p o rt 2 0 0 1

29
EXHIBIT 10
Employee Breakdown as of Dec. 31. 2000

Products Services Total

Netherlands 231 1.726 1.957
Germany 126 337 463
Belgium 56 104 160
France 183 134 317
UK 76 56 132
Other EU 134 20 154
Non EU 29 0 29
Total 835 2.377 3.212

EXHIBIT 11
5 year Landis Stock Price Development

30