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By Joey Gardiner, 4 May 2001 17:10

NEWS Sources close to the situation say the ASP is now concentrating its efforts on selling its ASPCentral software to other service providers, rather than its pure-play ASP business. It has also decided to stop selling to customers directly and will focus instead on its reseller channel, a move which has seen the laying off of its entire sales force. Gary Smith, CEO of NetStore, said: "We have had a dual sales strategy up till now, and we've found using VARs [value-added resellers] has been much more successful. It seemed stupid to keep on spending money on internal sales that weren't making money." Smith denied there will be more redundancies: "We have cut deep this time, there are no more plans for cost-cutting." On Wednesday, NetStore announced quarterly results that saw it hit revenue targets, but report widening losses. The company felt the time was ripe for putting a stop to the cash burn, culling 33 people despite the fact it still has £28m in the bank. However, a source close to the situation said the company has "cut its jugular" with the move. Not only is the firm to close its Manchester and Paris offices, but it has also got rid of both of its product managers and moved its VP of product development, David Blundell, to sales. Sources said the focus is moving from its existing hosting service toward selling its application management software - ASPCentral - to other ASPs. NetStore's Smith denied NetStore is about to abandon being an ASP: "We are stepping up investment in ASPCentral as a lot of companies have a need for this kind of product and we plan to make money out of it. But being an ASP is our business." Some analysts have, however, questioned the number of customers there will be for such a product. NetStore customer Opus Group says it is "concerned" about the company's financial position, with official figures showing it burning £4m to generate £1m in revenue. By focusing on cost reduction, some sources believe NetStore is preparing itself as a target for acquisition or looking to perform a reverse takeover. Nick Greenway, managing analyst at Datamonitor, agreed it could be an acquisition target. "Unfortunately they have peaked too early it seems, with a model that the market still isn't ready for," he said. "For the time being it's a matter of preservation until the market picks up."