One-On-One With Synnex CEO Bob Huang

VB: How has business been at Synnex this year? Can you summarize your 2002 financial performance so far?

Huang: I think generally it was OK. It was not really as bad as last year, based on expectations. People pretty much lowered their expeditures, so therefore, the supply side also lowered their expectations. Overall, I feel reasonably comfortable this year relative to a year ago or two years ago.

VB: Which technologies are selling better than others right now?

Huang: There's always some new stuff coming out, but I don't think you're going to see a major contributor to revenue. Most of the new products are upgrades or have more functionality. All this new stuff is probably more geared to consumers rather than for businesses. The Tablet PC has a lot of interesting twists to it. But it's probably going to be more of a niche product than the more generic PC or notebook that we saw in the past. I don't know how it eventually will shape up as a percentage of the total notebook [sales until people get used to it. Right now, it would probably be more of a small percentage, I would think.

There's a lot of talk about wireless, and you know, that's great. But how it's translating to revenues, that remains to be seen. And frankly speaking, it will not be anything major, from a distribution point of view at this point in time.

VB: Going back to Synnex's financial performance, are there any growth numbers that you can provide us for 2002?

Huang: I'm always open to you on these things. Growth was great last year, as you probably can imagine, for the opportunities that we had. So, we are very pleased. In North America, in the distribution segment, we probably grew 40-50 percent. And that's in North America alone. And don't discount that we had the Merisel Canada acquisition which took place in the later part of the summer of 2001. We also had a good Gates/Arrow acquisition. And as you know, we acquired assets of Novitech in Mexico which are also doing extremely well for us.

VB: There has been a lot of geographic expansion recently at Synnex. Are you still on an agressive path for geographic expansion?

Huang: Well, it's more focused on opportunities. If the opportunity presents itself, then we will look into that. But we are not so much [of the mindset that strategically we've got to be in some place otherwise growth wouldn't be satisfactory. That's not how we run the business.

VB: Are there other opportunities out there that you seeing and plan to take advantage of? Any you can tip us off to?

Huang: (laughs) They are always out there. With the shape of the industry, there are people with money and people losing money.

VB: Regarding the HP and Compaq merger, what is your opinion of the way things have been turning out so far? And what has been the impact on business at Synnex?

Huang: Without going into the nitty-gritty stuff, I think certainly it was expected that Compaq wanted to go more direct. Certainly, the channel as a whole -- us or the resellers, it doesn't matter -- lost a lot of business. And we lost of lot of business to the HP and Compaq direct sales force. And also probably more disappointing, is that we lost -- the channel combined with us -- a lot of business to Dell. And that has been apparent by all these numbers you're seeing by IDC and certainly Dell's numbers.

VB: Other distributors have talked about additional costs that will be passed on to the channel as a result of changes in HP's channel program. Those costs might affect rebates and discounts, etc. Are you anticipating those costs as well, and if so, how do you plan to assume those?

Huang: Well, there has never been that much [rebates and discounts in the first place, as compared to years ago. And certainly with further reduction, people would say we just can't take this business because it doesn't make any business sense. Or [the costs will force the channel to have another round of efficiency improvement. Of course, I don't know to what degree we could get down to.

VB: You sound pleased overall?

Huang: I am pleased overall, to be very open with you, for what we have achieved over the last several years. Year after year, our top line growth says that our bottom line supports our growth as well. So, I don't really have much to complain about. At the end of the day, I think the channel and probably the media needs to help us get past 'direct and indirect'. Today, the reality is that other than specific HP issues, there isn't any other major vendors talking about taking business away. Even when talking about HP/Compaq, you're talking about a very small segment -- their PC segment. It used to be very big, but now it's not really that big anymore. With HP, a huge chunk -- more than 50 percent -- is printers. And you got the enterprise, the servers, the storage... those are channel products. So there really isn't much conflict, per se, that I see. I think, if anything comes out of this, I see more people working together. People appreciate more what the channel has done at the distributor level and the reseller level. I see more and more manufacturers coming to us because of the important role that we play: to enable the distribution of products from the factory to the market.

VB: Who are some of those manufacturers that you are starting to see embrace the channel more?

Huang: I think we see IBM. We see the peripheral guys. You know, it's pretty much across the board. It's all the big guys you are familiar with. Toshiba, Onyx and Acer too. We feel that the environment is much better and more friendly today than it used to be a few years back.

VB: You're very positive about things. It sounds like, even though the economy may be flat, you're seeing a lot of positives in the channel. Is that right?

Huang: I think so. I feel that most of the weak -- at all levels -- most of the weak are already gone. Right? Think about it. You know, there might be some more consolidations. But at the manufacturer level, at the distributor level, at the reseller level... those who could not ride through either the downturn or the direct models competing against us are pretty much out of sight. We've got survivors now. And as soon things turn around, we're going to see the benefits.

VB: What major factors have been contributing to your success this year?

Huang: There have been a few things. I think we've got to treat our partners right -- both our suppliers and our customers. That's very important. Our business is a relationship business. And you know, it doesn't matter if it's the PC space. It doesn't matter if it's the printer space or storage space or whatever. You know, you have few friends out there, and they've been there for a long time. So, you've got to treat people right, number one. No. 2, we continue to work on our internal operation to make sure that we are efficient and that we can generate a profit. And if we can generate a profit, the shareholders will be happy. Then your employees will be happy. Then your vendors will be happy. Everybody's a happy camper. But you know, that's a lot of work. That's the name of the game.

VB: What will be your focus for success in 2003?

Huang: For what we have done or are doing, the channel has been rewarded with slightly higher margins. And I'm glad that Ingram and Tech Data and all the others try to manage that area, and be responsible to their share holders and other constituents. And we are the same way. I'm not saying that we will do it without the value. We're talking about wanting to make sure that our value gets recognized and we get paid for it. It's not healthy when people are not making money. If Ingram makes good money, and they're still the leader of the industry... if they make money, they get rewarded by the stock market. Then people will view us all differently.

VB: A couple of years ago, you were considering an IPO for Synnex. But then the market when flat. Today, is an IPO still a consideration for Synnex?

Huang: These things come and go, and they are market driven. Between you and me, if the market comes back again, then we'll go into a quiet period and my mouth gets shut. That's the cycle. Unfortunately, with the way particular things have happened on Wall Street, it's going to be more and more of that type of control. All along, I'll try to be open. But when it happens, we'll probably be forced to be quieter than we would like.

VB: The ACSII Group recently severed ties with Tech Data and announced that it wanted to do more business with Ingram Micro and Synnex. Did you know this was coming, and what are you doing to work more with the ACSCII members?

Huang: We were always working with ASCII Group. They're a big player. And I think we'll continue to work with anyone who would, one, appreciate the work what we do for them, and two, pay their bills.

VB: Is there something specific that you're able to offer the ASCII Group that maybe another competitor wasn't able to offer?

Huang: I don't know if there is anything that they particularly need. After all, from a reseller point of view, what do they want? They want products today. They want them cost effectively. They want products that can be supported. They want to work with people they can trust. Those are very simple things. And I don't think there's anything in particular that they required that we would need to do anything special on.

VB: In the last year, you've had a few big acquisitions: License Online, Gates/Arrow and some Novitech assets in Mexico. Can you give us an update about how well those operations are integrating into Synnex?

Huang: In North America in 2002, we had three acquisitions. The Gates/Arrow acquisition was fantastic. It got us into the software space, and we were able to keep the organization in Greenville. They work with our organization very well, and I think there are more than enough opportunities there.

The License Online [aquisition... well, it's a small outfit from Seattle. We acquired them, and we integrated them into our system. I think we're very happy with them. They've been part of our software strategy. So that's working well for us.

In Mexico, the acquisition we had was tremendous. We were able to hire key people from Novitech as a part of the assets we purchased. They've been doing really great. And you know, I couldn't be happier. We received great support from the vendor community in Mexico, so we're very happy about that.

VB: That's quite an aggressive expansion path you've been on in North America. Are we still going to see that same intensity in 2003?

Huang: It will be more opportunity driven. As time goes by, the number of players becomes fewer and fewer, and it will become more and more difficult. But if there's a good opportunity, I certainly would like to see if we could pull it together.

VB: Where should resellers be looking for growth opportunities in the new year?

Huang: You know, my feeling is that after all the cuts that most corporations did, I think corporations now are coming back and saying, 'Geez, we have done enough. We cannot run behind the competition, so we need to invest in our technologies. We need to see how the reseller community is going to help us to get us more productive.' So, I think that's where the opportunities lie for the reseller community and ensuring they can bring a value for their customers.

VB: What is the key differentiator for Synnex, as compared to your competitors?

Huang: Like I said before, we look for what our customers are looking for. The customer's problem is very straightforward. We talked about those few things earlier. Then, you look at the other side of the equation, the vendor community and what they're looking for. They want to find someone who can focus on their products and work with them. On the customer side, as long as we can deliver consistently at a good cost, I think we will have some customers. And as long as we are reasonable in credit, in RMA, the support side and we have a good, professional sales force out there who can service them, I don't think we should have much of a problem.