Synnex CEO Sees Big Opportunities For Tablet Apps, Integration

Synnex reported a solid financial fiscal fourth quarter Tuesday, beating Wall Street estimates for both sales and earnings. After announcing the results, president and CEO Kevin Murai spoke with CRN's Scott Campbell about 2010 and what to expect in the current quarter and beyond. The following are excerpts from the conversation.

Synnex earned $37.5 million on $2.47 billion in sales for the fourth fiscal quarter, while analysts had projected earnings of 96 cents per share on $2.37 billion in revenue. Meanwhile, Raymond James & Associates reported that worldwide IT shipments through distribution grew a double-digit percentage for the year for the first time in a decade. Can you sum up the quarter and look ahead to 2011?

In the U.S. business, significant growth came across all categories. We had good growth in all the core businesses that we have. The [product] refresh was strong and stable. Data center business, which includes enterprise servers and storage and some systems business was strong.

We also saw strength in the government business. SMB continues to move the needle and be strong as well. Our consumer business through retail was quite good. The products we are taking to retail really hit, with tablet-based computing as well. Overall, it was a terrific year and thanks go to our employees and customers.

Speaking of tablet PCs, that category was the big talk at CES 2011. What is Synnex doing around those products?

Our approach to the market is pretty unique. We leverage our IT development staff. We created a mobile development team and one of the first things we've done is mobilize our Web site. You can order online, check order status, scan barcodes and immediately order that product. That's one way we're taking new tools to customers, but also opening capabilities in demand. Customers can find more growth in commercial applications including for tablets. We're providing that layer of integration.

But on the hardware side, what are you doing with tablets? Are you planning to add new vendors as they bring more tablets to market?

The next big thing for us in hardware is first with the tier one OEMs. As they launch their tablets in the first half of this year, we are going to leverage that opportunity. In addition to that, we will pursue relationships with tablet manufacturers that we don't currently deal with.

Beyond hardware, what's important is the key carriers in the U.S. as well. We're developing those relationships. When you sell hardware, you have to have the ability to sell the data account that goes with it.

Synnex's stock price only increased 1.8 percent in 2010, ahead of some of your competition, but the broadline distributors generally performed below other distributors, channel companies and vendors. What do you guys have to do to get Wall Street to buy more into broadline IT distribution?

If you take a look at our relative stock performance, there will always be aberrations in the market. If you go back and do analysis with a different starting point, 18 [months] or 24 months as well as 6 months too, I do believe our stock price has done well, in particular compared to competitors. It comes down to continuing to focus on the company, finding innovative ways to bring more value to market and deliver more shareholder value. That's the highest level goal we have against our business strategy.

Next: Carriers Want Commercial Partners

It was announced earlier today that Dirk Meyer was out as AMD's CEO. What is your reaction to that and what would you like to see a new CEO focus on for that company?

Honestly, I've been so tied up in earnings and CES, I don't know much about it yet. AMD is a good and large partner of ours. We continue to do well with them. At a high level, we'd like to see continued innovation out of the company and partnership with the channel. They've been a solid partner.

Speaking of CES, were you there? What new products or gadgets did you see that you you liked or that you think VARs should follow?

I did not go on the show floor. I had a number of different meetings up and down the strip, but through osmosis, I was at places where product was promoted and demoed. So much was around mobility and the tablet itself. I do believe that will be a huge opportunity for us. The way we're looking at growth in that business in the commercial space is different than what others are doing. We also have great opportunity to grow the tablet in the consumer space with our retail business.

You mentioned developing relationships with the carriers. How are those conversations going? Are they interested in partnering with you or is it a tough sell with them?

Conversations are going well. I can't tell you any particulars but what I can tell you is the interest level is high, in particular when you talk about the commercial space. Most carriers believe the consumer is well taken care of by their current channels in that space, but penetration in commercial is what they're looking for. They want partners to create value around commercial applications. That's where we're really good.

At this point in the tablet game, would you say the hardware is ahead of the software, or vice versa? Are the commercial apps where they need to be to take advantage of the hardware's new functionality?

I wouldn't say hardware is ahead of software. As time goes on, I think you'll see improvements in computing power, better OSes, in particular with the Honeycomb version of Android and more bandwidth up to 4G, you'll see more robust connectivity. But the actual apps themselves are not going to be characterized as off the shelf. There's off the shelf e-mail connectivity, but integration into the business workflow, that's where we focus: on the very specific application layer.