Logicalis Buys Avnet's HP End-User Business

Per the agreement, Logicalis (No. 104 on the 2005 VARBusiness 500 list) will acquire Avnet's U.S.-based HP enterprise end user business and, in return, will move its HP and IBM product purchasing from Arrow to Avnet Partner Solutions for the next five years. The multiyear distribution agreement is valued at approximately $1 billion, according to both companies. Steve Tepedino, president of Avnet Technology Solutions, which includes Avnet Partner Solutions, says the deal strengthens both companies.

"This makes Logicalis one of our biggest partners," Tepedino says. "During the initial talks, it seemed like we had the right chemistry between the two companies to make this kind of deal."

While Avnet will be saying goodbye to its HP enterprise reseller business in the United States, the company's distribution arm will gain more than $200 million in annual purchasing from Logicalis at the expense of its top competitor, Arrow. Previously, the solution provider bought its HP and IBM enterprise products through Arrow, but that distribution deal recently expired. Now, Logicalis will add Avnet's HP end-user business and use Avnet Partner Solutions as its exclusive source of enterprise HP product.

"We're excited as heck about this partnership," says Mike Cox, president of Logicalis North America, headquartered in Bloomfield Hills, Mich. "It's a great day for us, and it's a great day for Avnet."

The addition of Avnet's HP business marks yet another chapter in Logicalis' aggressive acquisition strategy. Since the summer of 2004, the solution provider made two significant acquisitions of U.S.-based IBM resellers Eisco Technology and Solution Technology Inc. in an effort to diversify its business beyond its primary vendors, HP and Cisco. With the recent improvements made by HP, Cox says the time was right for Logicalis to make a sizeable investment in that part of its business.

"It's good for us to have another addition to the HP business after making two IBM acquisitions," Cox says "I'm a big fan of some of the changes HP has made in the last year, and I'm very excited about HP going forward."

Logicalis, which will boast more than $450 million in annual revenue once the Avnet acquisition is completed, doesn't plan to slow its acquisition strategy down.

"Our goal is to get to $700 million by the end of our fiscal 2007, which is 15 months from now," Cox says. "To do that, we're going to make some additional acquisitions in the services market, particularly in the staffing augmentation market, which has been one of our strongest services areas."