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SED has always measured itself on its success serving SMB solution providers with a more personal touch than they can get from larger distributors—like having dedicated account reps for even the smallest of solution providers. But five SED customers said they would continue to rely on the distributor until they saw that the lawsuit was impacting SED’s ability to serve them.
“We will continue to use them unless it got to a point where the company was on shaky ground. We need to make sure there are reliable shipments,” said Ryan Bowman, service manager at Esh Computer Center, Lancaster, Pa. “We don’t get the same pricing from them as with others, but there are some items where they do better. There are enough distributors on their level to pick that up, that will bend over backward to get our loyalty.”
Meanwhile, SED continues to chug along with the resources it has. The company is developing consumer-electronics and cellular businesses to complement computer products, which still account for about 70 percent of revenue, said Jonathan Elster, executive vice president at SED.
Last September, SED announced a three-year, $50 million asset-based credit facility with Wachovia, an action that Mark Diamond said he helped secure before he was fired.
SED is using about $35 million from Wachovia to help finance operations and grow new business, Elster said. “It helps us pay vendors faster, and we’ve made investments in other areas. We are now using Salesforce.com and we recently enhanced and redesigned our Web site. Overall, we continue to look for new opportunities to bring more and more solutions to our customers,” Elster said.
The distributor recently signed distribution deals with Mitsubishi Digital Electronics for LCD and DLP TVs, Canon for digital cameras, camcorders and printers, and Tom Tom for GPS products.
Despite being a publicly traded company, SED has not publicly released its financials since fiscal year 2004. SED filed for nonreporting status, which allows companies with fewer than 300 named shareholders to keep their finances to themselves. SED has about 1,300 shareholders, Diamond said, but only about 200 were named in 2004. Since then, Diamond has gifted some of his shares to more than 100 people in order to bring SED above the 300-person limit and get the company to release its financials to the public again, he said.
Diamond said he prides himself on trying to do what is right for SED shareholders and solution providers, whom he believes also have been abandoned by those now in charge at the company. SED counts 3,500 to 5,000 active IT solution providers in its partner base.
“How would you feel if you’re a shareholder and not getting information from the company? Why should you invest in the company?” Diamond said. “How about a customer community that wants to know if it [makes sense] to do business with you?”
Former board member Rosenthal said it just may be that the days of the small distributor are over. “I don’t see a need any longer for the small distributor,” he said. “I saw what has happened to distributors in other industries. They’re gone. In the computer industry, it’s survival of the fittest, which is Tech Data and Ingram Micro.”
Ideally, Mark would like to see SED succeed, perhaps with himself back at the helm. But he knows that is unlikely and he has little faith in the current board to implement a successful long-term strategy.
These days, Mark Diamond’s wife, Shay, stares into her husband’s face and a pair of tired eyes stare back, weighed down by the strain of a situation that threatens to tear a company and a family apart.
“He truly loved SED,” she said. “He put his all into it and the very people he trusted the most are the ones that hurt him the most. I’m just sorry because he saw SED as his father’s legacy and he wanted to take the business back to where it was before.”
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