Avnet COO: Changes Will Benefit VARs

Avnet named a new head of its Technology Solutions, Americas, business Wednesday and is coming off a fiscal quarter in which that part of the business saw "lackluster" sales, according to its CEO. With new changes at the distributor, Scott Campbell, Assistant News Editor of Everything Channel, spoke with Rick Hamada, senior vice president and COO of Avnet, to talk about what's happened, what to expect in the future, and what he sees happening in the market today. The following are excerpts from the conversation:

What did you like about Jeff Bawol, who you named today to replace Fred Cuen as president of Avnet Technology Solutions, Americas, business?

First, I want to make clear that Fred Cuen has not left the company. He is evaluating alternatives within Avnet. We obviously made a business decision regarding TS, but Fred is looking at some things and he has not left the company. Obviously this [position of head of Avnet TS] is a key role, it's a big business for us and we wanted to move quickly to keep focus and momentum. Jeff is a proven leader. He's had quite a ride with the storage and software group, with 42 percent [CAGR] the last three years. He's helped develop relationships with some key enterprise storage and software vendors. He's earned the opportunity to take his thoughts, his ideas, his strategies to the next level to see how they deploy across a broader base of our enterprise portfolio.

Last month, CEO Roy Vallee noted that Avnet TS's business had "much lower-than-expected revenue" and "lackluster sales" with some products. What happened there?

Roy's comments were about TS globally, with about 60 percent [of the issues] being Americas and 40 percent EMEA. It was a confluence of factors. Some of it was due to external things. There were some internal execution issues. It was a combination of issues. Other than a geographic breakdown, I'm not sure we've gone through that much level of detail [publicly]. The analysis of the results have led us to some decisions and changes in the business and we are implementing those in a timely manner.

What's the plan to fix it?

Jeff's the guy best guy to address that. He's working on his first 100-day plan now. It's only Day One of course, but from my perspective, I'm sure we'll look to accelerate the success we've had and be judicious on where the growth is and where it is not, and allocate resources accordingly. We will run with the stars, make sure we give the right people all the most opportunities. If there are other opportunities that are not growing, we will manage that transition and the relocation of resources. It's a matter of portfolio management.

If you had to pick one factor for the third-quarter issues, was it an Avnet execution issue, a vendor issue or a market issue?

I can't pick one. It's not that straight forward. I can tell you it would not be our style to have one single quarter set of results be a sole determination for changes or moves. It's not as simple as we had a bad third quarter, here's the changes. We have a broader view of the overall business. We do look at the external market. There are a variety of factors.

Has Avnet selected a replacement for Bawol to head the storage/software group?

We will not do so simultaneosly. It's a top priority and we're looking at a short-term dual role for Jeff. As you can imagine, it's hard to start a process for change] without having a successor for Jeff [with the software/storage group]. We are working through the process. We will move quickly and I anticipate it will be a short term before we have someone.

How does Avnet's business look these days? Is the pipeline look better than it did a year ago, or are people delaying spending?

I'm not the best guy to answer that overall. I work heavily with John [Paget, global president of Avnet Techology Solutions]. I don't have the Americas VAR-by-VAR pipeline on a regular basis. From my perspective with an aggregate look at things, we did provide an outlook for this quarter for TS that was less sequential growth than we experienced last year. As an example, TS global level I believe sequentially grew 21 percent. That was our first June quarter with a Sun [Microsystems] fiscal year end. We're learning about the new seasonality for TS, with a spike in the June quarter influenced by Sun. I think our guidance was 11 percent] to 12 percent this year. That's in recognition of the environment. Looking at the leading indicators, we felt that was more prudent guidance.

What do you see going on in the channel that you have to react to and how should VARS be adjusting their business accordingly?

I've always believed the channel was a very resilient entity, the channel being inclusive of VARs and distributors together. We are engaging with some large suppliers more on SMB than enterprise. Some more want to focus more on services than products. For us, let us know what the rules are and we will figure out a way to achieve your goals within that set of rules. We have the privilege of representing the greatest technology companies. Our value is to accelerate their success in the marketplace. That's always been our role. From that perspective, not much is new or different, within the portfolio we are putting more focus on solutions, less on technology for technology's sake. In the case of some of us, it's a move to establish more global relationships. Avnet, along with others is investing globally to build out the TS business. Not only in the Americas, but EMEA. In 2007, we made an acquisition in Asia-Pacific. We're looking to leverage global business, to make sure we have a presence in emerging market areas.

Do you see more VARS looking for you to help them grow globally, or are they still focused in the Americas?

There has been some of that [global interest] as some VARs have customers with multi-national needs. But it's still more the exception than the rule. Could we see that growing? Certainly. We'd love to be in a position to do that. Most of the VARs domain is regionally focused. For example, with Sun VARs, it could the Western United States or a metropolitan area. It all depends on the scope of VARs. There has been some of that in our embedded solutions business, our integrated custom solutions business. There, we opened an integration center in China in December 2006.

Finally, are there any technology areas where you think are especially ripe for growth for VARs?

VoIP and virtualization for sure. Those are absolutely, nice red hot areas.

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