Synnex revenue fell 1.6 percent in its first fiscal quarter ended Feb. 29 compared to the year-ago quarter, and the distributor's shares are down more than 11 percent in morning trading Wednesday.
Synnex CEO Kevin Murai partially attributed the decline to the distributor's focus on higher-margin and not higher-volume products. CRN spoke with Murai about that strategy, whether Synnex was losing market share with solution providers, and how the company is evolving. The following are excerpts from the conversation.
You talked about a focus on higher-margin products. Your competitors would spin it as Synnex losing market share. Is that also the case, and what are some of the higher-margin product areas you're talking about?
Murai: It's part of our overall business strategy. Our technical solutions division really contains different business units characterized by a number of different things. It could be specialty markets like data capture, professional A/V, wide-format print. It could be a market that requires a different sales organization like enterprise servers and storage, where you do need a sales organization that is more technical and participates more in the sales cycle with the VAR in selling to the end user.
Those are some of the key markets we're talking about. Because they tend to be more service-rich business models, they do come with higher gross margins. In addition, it's services, professional services and some services tied directly to the distribution business like value-add and configuration or our CloudSolv or RenewSolv services.
If you're focusing more on enterprise products and specialty products that require more touch with customers, is Synnex moving away from being a broadline distributor?
Murai: We view ourselves as a hybrid distributor. We do cross over the line between enterprise and broadline, but we also do a good job in the specialty space. We do it not by being a monolithic organization that has and sells everything. Being a mile wide and an inch deep is not very effective. We have product that sells in key markets, either by vertical or by product technology. In essence we have the capabilities of a specialty distributor yet are able to leverage the strength of a very large distributor.
Does that mean you really need separate sales groups to deal with VARs depending on the product they buy?
Murai: We do. Our wide-format team is an exciting team, for example, and retail is a dedicated team through the New Age Electronics [division].
On Synnex's press releases now, the company is described as a 'business process services' company, not as a distributor. What is the reason for that?
Murai: Really, when we look at what we do well, when you look at the legacy business model, we have BPO capability on our services side. We have the traditional pick, pack and ship and inventory management on the distribution side. But what we understand is technology and how to get it into the marketplace, whether it be on the services front end or going to customers through our GBS [Global Business Services] division or assembling solutions together and attaching other services to make that solution work. That's what the tagline means.
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