Tech Data Corp.

 
 
By eweek  |  Posted 2001-05-07 Email Print this article Print
 
 
 
 
 
 
 

Forget the TV show "Survivor". It doesn't even begin to compare with the struggles that have afflicted the mass-distribution business over the past several years.

Forget the TV show "Survivor". It doesnt even begin to compare with the struggles that have afflicted the mass-distribution business over the past several years.

With margins plunging two years ago to less than a single percentage point, it was just a matter of time before multiple distributors pulled up lame. But in this iron-man-style competition, Tech Data has emerged stronger than ever. And while its closest rival, Ingram Micro, remains a powerhouse in its own right, the field has been largely gutted.

"What were seeing is the emergence of more fragmented niches," says Tech Data CEO Steve Raymund. "In the past, the world was largely one-size-fits-all. Youd buy PCs or printers. We were organized around customer segments. But now were seeing the proliferation of types of technologies and markets that are organized around specialties. Its more complicated, there are more pieces and its more specialized."

While some vendors have been pitching that shift for several years, timing in this business is everything, and nobody has played the market better than Tech Data. The company has pushed into information appliances, multiway Intel servers and enterprise applications, components, and specialty areas such as computer-aided design and imaging.

Tech Data has been extremely diligent about avoiding the mistakes of other broad-line distributors like Merisel, the onetime No. 2 distributor that never recovered after spending several hundred million dollars to buy a franchise business that died on the vine.

At the same time, Tech Datas solid business focus has allowed the company to lure customers from rivals like Ingram Micro over the past year, creating an upward spiral for itself that has allowed it to remain strong even in a down market. The more resellers and partners it has, the more vendors are willing to pay for its services as a key component of their go-to-market strategies.

Nevertheless, its fiscally conservative approach has kept Tech Data out of the one place it has been eyeing with envy. The distributor has been trying to get into the midrange market for the past year, watching the continued success of distributors like Arrow Electronics, Avnet Hallmark and KeyLink.

But despite the temptation, Tech Data held off buying Merisels MOCA unit to win a piece of the Sun Microsystems market. "We opted for a more patient posture," Raymund says. "The Pioneer acquisition of Dickens worked out well, but they already had a solid infrastructure. We didnt have much midrange expertise."

Tech Data also lured away Perry Monych, CEO of GE Access, which still has a thriving Sun distribution business. Raymund says the real reason for hiring Monych was that he was successful in running an $11 billion distribution business. But he adds that midrange expertise isnt exactly a bad thing to have, either.

Still, the shakeout from the dot-com meltdown could open all sorts of doors for Tech Data. "Our theory is that a slowdown like this is a sobering reminder to any company of the value in focusing on core competencies," Raymund says. "For companies that didnt indulge in downstream vertical integration, were better positioned. Direct distributors are rethinking their position now. EMC is looking at doing some stuff through Unix vendors, for example."

And Tech Data is looking at ways to improve efficiency even further. "Theres still a lot of headroom for improvement, particularly if you know how to operate on an international basis," he says. "With the proper controls and information, you can provide high-quality service no matter where you are and earn a consistent return for your shareholders."

What a concept.

 
 
 
 
 
 
 
 
 
 
 

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