Sources: Two of Microsoft's Biggest Partners Are Looking For Buyers

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Two of Microsoft's biggest software licensing partners are looking for buyers, in the latest sign of the impact the software giant's shift to cloud computing is having on its channel.

CompuCom, No. 23 on the CRN SP500, a $2.2 billion system integrator based in Dallas, is looking to sell its Microsoft licensing business, multiple sources familiar with the company's plans told CRN this week.

En Pointe Technologies, No. 42 on the CRN SP500,  a $700 million Los Angeles-based national Microsoft enterprise partner, is seeking a buyer for the entire company, according to sources, who all requested anonymity because they're not authorized to speak about the matter.

Sources said both CompuCom and En Pointe have both recently held acquisition-related talks with SoftwareONE, a $3.3 billion solution provider based in Milwaukee. Christopher Rozzi, senior alliances manager at SoftwareONE, declined comment.

High-level executives from En Pointe and SoftwareONE "have been talking about a merger or outright purchase for a long time. It's come to a deeper conversation in the last three weeks or so," according to one source. Another source said a banker had reached out on En Pointe's behalf seeking a potential buyer.

En Pointe CEO Bob Din denies that the company is looking for a buyer.

"It's simply not true. We are not for sale. Our business is on fire. Every facet of our Microsoft business is growing like crazy. We're winning business in all areas, including solution sales and professional services, not just Microsoft business, so I don't have any reason to sell," Din said in an email to CRN. "This is a rumor promoted by unnamed competitors to disrupt our business plans, and we won't let it. This is strictly rumor."

CompuCom CEO Jim Dixon declined comment.

Both CompuCom, founded in 1987, and En Pointe, founded in 1993, one-time high-flying public companies that are now privately held, are part of a small group of partners that Microsoft calls Licensing Solution Providers (LSPs). Potential buyer SoftwareONE is also an LSP.

LSPs are the only Microsoft partners authorized to handle software volume licensing transactions. Microsoft does not publicize the number of LSPs it works with; channel sources say there are approximately 15 in the U.S. CompuCom and En Pointe are also part of the handful of partners Microsoft allows to sell Surface tablet/PC hybrids.

[Related: Sources Say Microsoft May Revoke Compucom's Status As A Top Partner]

Sources told CRN in November that Microsoft was considering revoking CompuCom's LSP status because it wasn't meeting revenue targets or investing enough in technical certifications.

En Pointe, meanwhile, has a strong services business and is also one of Microsoft's largest Office 365 partners. Last June, Los Angeles County picked En Pointe to implement more than 100,000 Office 365 seats, a deal worth $72 million in licensing revenue alone. 

One longtime LSP sales executive told CRN that Microsoft licensing isn't nearly as lucrative as it used to be.

"The profitability is more or less gone from a Microsoft licensing standpoint," said the executive, who spoke on condition of anonymity.

In addition to profitability concerns, some LSPs are having trouble meeting Microsoft's requirements and are in danger of losing their LSP status, said the executive. "Some LSPs are in a huge state of flux right now," he said.

For years, LSPs had the volume licensing market to themselves, but Microsoft has steadily been cutting their fees in recent years, one longtime Microsoft partner told CRN.

"Microsoft is broadcasting, at the highest levels, that software licensing is a business they're not going to continue to pay for," said the partner, who requested anonymity.

NEXT: Why LSPs Are Now Competing With Traditional Microsoft Partners

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