Smith Eyes Acquisitions, Applications For Electrograph

CRN: Why Electrograph? Why now?

SMITH: Let's assume this display solution industry is $4 billion. If you take into account all the [distribution] players, you probably have about $800 million to $1 billion. That's a max of 25 percent of the market. Other [technologies] have 60 to 90 percent through channels. Cisco is 80 percent-plus. Nortel is very high, so is Avaya. There's room for growth. That's on top of a market that will grow dramatically for the next years to $8 billion to $10 billion. If you're maturing and, say, only 60 percent goes through the channel, that's a $5 billion opportunity.

CRN: What are your goals for the company?

SMITH: Electrograph is about a $150 million-plus distributor. They're the largest [in the display space]. It's not only fragmented, but everyone is still relatively small. What I hope to do is expand the product portfolio within the solution set. The opportunity was so great, very similar to Westcon, which I helped grow from $240 million to $2.2 billion in 2001 by expanding the portfolio.

CRN: That's a big jump. How do you plan to do that?

SMITH: The way I grew Westcon was hiring good people, but half of the revenue came organically, half from acquisitions. It's the same opportunity for Electrograph. They have scalability to grow organically to $500 million. We'd like to go after $250 [million] to $500 million worth of revenue through acquisitions and then grow that business to $2 billion.

CRN: Give us a snapshot of what the display solution provider base looks like.

SMITH: The reseller market is very fragmented. In data/ voice, you have huge players like Dimension Data, IBM Global Services. But for displays, you have a significantly more fragmented market. On the commercial side, you have the people doing boardrooms [and] conference rooms, that are still very fragmented. The bigger players are in the $10 million to $20 million range. Their need for a value-added distributor is that much greater. They are very skilled, but they need more help with credit, virtual inventory. When you're a $10 million company, you need to meet a payroll. You can't take title to 40 plasmas waiting to be deployed.

CRN: Are new VARs coming to the display space?

SMITH: I think you will see some classic data/voice integrators trying to reach this area. VoIP leads to teleconferencing, which leads to videoconferencing, nowadays on a plasma screen. However, if you also think about integrators with local expertise building boardrooms, you have to take into account furniture, wiring, cabling. I think you'll see those integrators scale up.

With the new wireless 802.11n, you can get 100 Mbits of clear throughput—and you can do that over 300 feet. I can see the day when you buy plasma and it comes with a wireless piece, you either integrate it or plasmas may come with wireless in it. You can put a wireless adapter on the cable box.

Those are big market opportunities for integrators. Understanding the A/V, wireless and digital phone, you can integrate the products to do different things, such as if someone rings your doorbell, a video feed pops up on your plasma or your cell phone.

CRN: What will be the applications to drive the display industry over the next few years?

SMITH: We're getting to the day when you can run your home or business [remotely]. You can turn on [air conditioning] before you come home from a Web page or from your cell phone. At some point, the plasma becomes a touch screen. You need a touch point. That will come from display solution applications.