Problem:
FaxNet Corporation was a Top-3 provider of Voice over IP and Fax Over IP services in the US. All of its business was indirect through large carriers. In 1997 FaxNet acquired a Latin American based competitor as a way to penetrate that market, which had just been deregulated. The problem, however, was that the company being acquired had a direct sales to end users model. For one year FaxNet USA tried to keep both models running concurrently, but this attempt proved unsuccessful because it was too expensive and did not bring synergies or economies of scale between both organizations. To make matters worse FaxNet USA did not understand the business and cultural differences between regions. Only after 16 months of the acquisition FaxNet Latin America was losing over $200 thousand per month and a customer churn of 25%.

Core Strategies Assignment:
Core Strategies mission was to reorganize FaxNet Latin America planning and executing the transition from direct to indirect sales; building and managing a channel program; targeting local carriers, ISP’s and broadband providers; and turning the subsidiary profitable by the end of the second year.

Solution:
Core Strategies took over as interim management of FaxNet Latin America. In the first 30 days payroll was reduced by 45%. A smaller and focused sales team was retrained. An aggressive channel program was implemented in 90 days and it was introduced to 17 Latin American carriers. At the same time the local subsidiaries of the US carrier clients were contacted and prospected. Marquee accounts were signed in Argentina. Mexico and Brazil to build awareness of FaxNet Latin America. At the same time an aggressive PR campaign was launched to educate on the benefits of IP based telecommunications.

Results:
As result of Core Strategies’ efforts FaxNet Latin America signed up 7 large Latin American carriers as clients within 12 months of the reorganization program. In addition, large non-carriers clients, such as the Post Office Agency in Argentina, were also signed. Sales grew from $225k in 1996 to $14.5 million in 1998 and the FaxNet Latin America became the largest Fax Over IP vendor in that territory with 31% market share. Profitability was achieved in 15 months. A public IT company acquired FaxNet USA at the end of 1999 for over $250 million. FaxNet Latin America represented a sizable portion of the overall evaluation. FaxNet Latin America was kept unchanged and took over the Latin American operation of the acquiring entity.