Q&A: CDW, Berbee CEOs Shed Light On Acquisition

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CDW Chairman and CEO John Edwardson and Berbee Information Networks CEO Paul Shain answered questions during a teleconference about margin pressure and solutions growth strategies in the wake of CDW's $175 million deal to acquire Berbee, one of the largest privately held solution providers with Cisco, IBM and Microsoft practices. Below are excerpts from question and answers sessions with CRN and other media.

Q: Given that Berbee is very much a services-solutions organization, do you envision that you are going to be able to keep the same margins that Berbee had before from this business going forward or do you envision using your volume to drive down the cost of solutions to your customer, making price a differentiator as you go out (to the market)?

Edwardson: You know this is an interesting question because in general our margins are better than any VARs that we looked at. So I have never quite understood your question because if you look at our margins and compare them to the industry in general our gross profit margin is as good as anybody's and our operating income as a percent of revenue is generally better than anybody's. I actually don't think the question is a relevant question.

Q: Can you give a little more color on the vision of where you see this ending up. For example, if Berbee has 11 offices now in the Midwest, do you envision having hundreds of local offices across the country to compete against local VARs?

Edwardson: You know we have not thought about hundreds, certainly. Paul, I think you can speak about this one best because it was your vision that got me very interested (in buying Berbee). So why don't you talk about your growth ideas.

Shain: Our vision of growth is I don't think it is hundreds, but I do think there are certainly some geographic areas you can cover from a regional area. I think it is going to be more of a regional approach moving forward. We have looked at and certainly made a number of acquisitions in the history of Berbee. Our view is always to find great companies that may have one or maybe two product categories or product areas that they focus in on and bring our full portfolio to them. Hundreds is not necessary, but good solid strong regional offices that can support a state or a region are really the model moving forward.

Edwardson: One of the things that we are very excited about is, as you know, CDW has hundreds of thousands of customers around the U.S. and, as we look at major cities in the U.S. in most major cities, we have thousands of customers in each of those cities. So as we are moving and expanding, we will add a deep list and a good rolodex, if anyone uses rolodexes anymore, of names. And we think it will be a wonderful way to help open and establish these new offices.

Q: You mentioned that you have been looking at a number of possible acquisitions over the past year or so. Are you in fact still looking for other VAR acquisitions?

Edwardson: What we are going to do in the future here is in terms of what Berbee does, the growth will be within Berbee. So Paul will be very active looking and he will be getting the resources to work with him of CDW's own team. So the answer is we will grow both organically and by acquisition in the Berbee operation.

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