CDW-Berbee Faces Biz Model Challenge

The CDW-Berbee Information Networks merger will ultimately be judged on the companies' ability to combine their very different business models, said members of the Global Technology Distribution Council in San Francisco last week.

"They are very different, but synergistically, they have new opportunities. Model changes are an ongoing process and the key to this is their ability to execute on the vision they're working on," said Fred Cuen, president of Avnet Technology Solutions, Americas.

Several distribution executives said the $175 million deal made sense because there is little customer overlap and CDW and Berbee both are well-run companies.

"If and when it closes, it bodes well for CDW. It dramatically changes their model with the Microsoft [business], data center and Cisco practices and all the other services that Berbee has," said Pete Coleman, executive vice president of the computer systems division at Agilysys, which counts both CDW and Berbee among its top 20 customers. "They also have a very robust IBM enterprise. They have the capability to scale out across all customer bases. The management team at Berbee is one of best in the industry."

"It's a very logical move," said Ken Lamneck, president of the Americas at Tech Data. "John [Edwardson, CDW CEO] didn't want to buy another company like his. He was looking at how to extend his model. And he could buy other companies to really broaden this strategy.

Edwardson has alluded over the last year or two that CDW was seeking acquisitions to meet an explicit revenue goal of $10 billion by 2008. The Berbee deal won't get there, but it is a start, said Greg Spierkel, CEO of Ingram Micro. "John [Edwardson] has been explicitly saying I need more growth, more services, more networking capability. Especially as he goes out to business [customers] as opposed to consumer [business]. He's taken a first step. He's stuck his neck out. How well they execute beyond that, we'll see. That can take many quarters to many years. They still will be a relevant partner in this marketplace.

It will be interesting to see how competitors to both companies respond, said Jim Illson, COO and president of the Americas at Bell Microproducts. "It portends more consolidation in this space. Players are looking how to engage with more end users. I think this may be part of something larger," Illson said.