VARs: CDW Makes Value Play With Berbee Deal

Solution providers applauded CDW's planned acquisition of Berbee Information Networks as a smart move for the direct marketer, all the while wondering how the deal might impact margins for their own businesses.

"CDW has been looking for ways to get out of distribution and into value-add," said William Brennan, president and CEO of Forsythe Solutions Group, one of the nation's largest regional solution providers. "It's a good move for CDW. Berbee is a very good company."

Under the acquisition deal, slated to close at the end of next month, Vernon Hills, Ill.-based CDW is buying Berbee -- a $390 million Microsoft, Cisco Systems and IBM-focused solution provider -- for $175 million in cash. CDW aims to leverage Berbee's services and solutions expertise to boost sales to high-end customers. Berbee, based in Madison, Wis., is focused on the Midwest, but CDW hopes the resources can be a springboard to offer higher-end solutions nationwide.

Brennan said he met with Berbee executives at the recent Cisco partner conference, and both Forsythe and Berbee believe the biggest issue facing VoIP solution providers was the dearth of technical talent necessary to continue to grow. Berbee has a great program for attracting hot technical talent from universities, he added.

"The good news for us is there is a lot of room in that space," Brennan said. "We are not demand-constricted."

Brennan said he doesn't foresee telephony margin pressure in the near term. "For now, this business is so fragmented," he said. "Companies in this space compete regionally. Berbee might be a good seed for CDW to grow this business."

CDW's move into the telephony space with the Berbee acquisition makes a lot of sense, given how Microsoft is pushing the convergence between PCs and VoIP, according to Brennan.

"Right now, we are not pitted against any one firm," he said. "The highway is so big that no one is crashing into each other. But we may someday."

CDW can better compete against solution providers on services if it's able to integrate two very different business models as it incorporates Berbee, said Wes Herschberger, CEO of MapleTronics, a Goshen, Ind.-based solution provider

"I don't see how the two complement each other. My initial reaction is that CDW is going to have a hard time making this work," he said.

Even with Berbee operating as a separate unit, the challenge of blending CDW's low-price reseller approach and Berbee's solution-selling approach is significant, Herschberger noted.