John Malec, the founding chairman of struggling micro-marketer VideOcart Inc., resigned Friday from the Chicago firm, three days after stepping aside as chief executive.
William B. McKnight Jr., one of VideOcart’s outside directors, downplayed assumptions that the move signified more turmoil and instability at the company. He said Malec, 48, resigned so he could pursue a possible purchase of “technology assets” from the company.
McKnight said that the board and Malec came to a conclusion that, given Malec’s proposal, “it was inappropriate for John to remain as chairman.”
Neither McKnight nor VideOcart would disclose what assets Malec, the company’s largest individual shareholder, was interested in acquiring.
The company, founded in 1989, markets an in-store message system that displays advertising, headline news and supermarket information on a wireless video. The messages are activated by transmitters in different aisles of the store.
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The company said that instead of immediately filling the position, it would create an executive committee made up of three outside directors to perform the duties of the chairman until the next board meeting.
On Tuesday, VideOcart President Ronald E. Spears, 44, succeeded Malec as chief executive. Spears was president of the Midwest division at MCI until early 1991, when Malec invited him to join VideOcart as president and chief operating officer. The two had known each other when Spears sat on the board of Information Resources Inc., the consumer-information tracking company that Malec helped develop and found.
McKnight, a former top executive of Nabisco Foods, said Spears wasn’t appointed chairman immediately because “we wanted to provide additional support to Ron Spears. As you might expect, the combination of chairman, chief executive and chief operating officer is one heck of a responsibility.” The board will discuss the change in management at a previously scheduled meeting next week.
Earlier this week the company also announced that it was trimming payroll expenses 15 percent and negotiating the sale of its software business in Australia to help raise capital and reduce costs.
VideOcart, which in 1992 posted a loss of $44.9 million, or $1.22 a share, on revenues of $7.1 million, has had difficulty making payments and raising capital, sources said.
In response, the stock has taken a beating on Wall Street in the last year, dropping to $2.62 Friday; in the last 52 weeks it had traded for as much as $12.62.
A major part of VideOcart’s long-term strategy centered on an alliance with International Business Machines Corp., announced in July 1991, in which the computer giant would make the terminals that VideOcart attaches to shopping carts. At the time, VideOcart had neither the capacity nor the interest in large-scale manufacturing.
That alliance, however, was dissolved by mutual agreement this year. VideOcart said the change occurred because it decided to switch to a different format for the terminals.
However, one market source speculated that IBM became concerned about VideOcart’s ability to pay for shipped products.
Last September IBM agreed to convert accounts receivable from VideOcart into long-term debt, thus easing the repayment burden on the Chicago firm. However, as a condition, IBM required that Malec kick in $10 million in equity in the form of convertible preferred stock, according to a filing last year with the Securities and Exchange Commission.
When the two companies decided to break off their relationship in February, VideOcart agreed to meet its $41 million of obligations to IBM with a lump-sum payment of $17 million and by lowering to $4.62 a share, from $6 a share, IBM’s existing warrants to buy 540,000 VideOcart shares.