LAN Professional - the Cabletron channel in Brazil

Two companies were registered in 2000 - LWS Comercio e Servicos em Informatica in May and ABPR Participacoes in August - and traded under a third name that neither of them carried on paper. Together they were Grupo LWS; to the market they were LAN Professional, and the slogan was sempre ao seu lado, always by your side.

They began as Cabletron Systems' distributor for Brazil, and the timing was accidental but decisive: within months Cabletron reorganised into four companies, and LAN Professional's problem became holding the relationship together across a vendor that no longer existed under that name. It worked. Under Enterasys they came to carry roughly ninety per cent of that vendor's distribution in the country, and the recovery filing is candid about why: Enterasys had been distant from its Brazilian channel, and the fix was somebody answering the telephone. Where competitors offered email and chat, this one offered a person.

In six months of trading it passed ten million reais. Revenue grew 269 per cent between 2000 and 2001, in a year of the September 11 attacks, the Argentine crisis and Brazilian electricity rationing that held national growth to 1.31 per cent. The customer list reads as a map of the era: Volkswagen and Chevrolet, Unicamp and Mackenzie, Banco do Brasil, Anatel and Infraero, TAM and Embraer, Albert Einstein and Samaritano.

From 2003 it ran its own training centre, and in 2005 became the authorised training centre for Brazil and Mercosur for F5 Networks and IronPort - teaching switching, routing, wireless, intrusion defence, application firewall, storage and SSL VPN to the channel it also supplied.

THE CONTRACT THAT DID IT. In 2004 they won Cobra Tecnologia, worth 43.4 million reais. It was delivered in full and on time, revenue doubled, and it was the largest year in the company's history. Then the payment ran late. The plan names the mechanism precisely - a reverse overtrading - and it is the whole story: a distributor on thin margins had financed a contract larger than its working capital, performed perfectly, and could not wait. From 2005 the company funded itself with borrowed money, and the finance charges consumed 13.2 million reais over four years, averaging five per cent a month of all revenue earned.

Everything after that is aftermath. Public tenders from 2007 lifted revenue again while the interest ate the margin. A 3.65 million real storage system was destroyed in transit in November 2008 and the carrier did not pay. The credit markets closed. On 20 February 2009 the company filed for judicial recovery, with 49.5 million reais owed and thirty people still employed.

The lesson is not that they mismanaged it. They executed the biggest contract of their lives correctly. For a business whose margin is thin and whose capital is borrowed, a single customer large enough to double the year is an existential risk even when everything goes right - and the risk lands not on delivery, but on the date the money arrives.