Distribution Roundup: 2004 Marks Major Progress

As Frank Sinatra once sang, "It was a very good year." And it was for IT distribution, though that may seem hard to believe, considering some of the market factors at play in 2004, such as the continued cautious outlooks on IT spending; a lukewarm stock market and uncertain economy at large; and last, but certainly not least, the major shift in the channel in which more and more solution providers are de-emphasizing product sales in favor of higher-margin and higher value-add services.

Nevertheless, IT distributors across the board rose above the chaos this year, whether they were specialized or broadline. For a handful of companies, such as Synnex and ScanSource, 2004 turned out to be their best year, despite adverse market conditions. Others, meanwhile, simply marked a return to steady revenue growth and profitability--no small feat. Here's a rundown of the highlights:

Ingram Micro: The world's largest IT distributor has weathered some high-profile executive changes--president Mike Grainger and vice president of sales Pat Collins departed the company earlier this year--with double-digit revenue growth over the first three quarters this year (at press time, many distributors, including Ingram Micro, had not announced their fourth-quarter earnings). But even more crucial for Ingram Micro was its major acquisition of Tech Pacific, an Australia-based IT distributor that gives Ingram Micro a window into the all-important Asia-Pacific market.

Tech Data: The Clearwater, Fla.-based company stayed in step with its biggest rival, posting impressive double-digit sales increases for its first three fiscal quarters this year, including a 23-plus percent gain in Q2, while also improving earnings. More important, Tech Data filled a glaring management hole with its appointment of Ken Lamneck, formerly of Arrow/Richey Electronics, as president of the Americas. Tech Data also beat out its rivals to land a major broadline distribution contract with EMC in March, which the company recently expanded to include federal government business.

Synnex: Perhaps more so than any other distributor, Synnex embodies the progress of IT distribution this year. After making a splash with its IPO in late 2003, the Fremont, Calif.-based company posted revenue increases of 37 percent, 35 percent and 29 percent for quarters one through three, respectively. In addition, Synnex appointed former GE Access head John Paget as president of North America and COO of the overall company to help the company move beyond its low-price model and offer resellers more value-add services.

Avnet: While Avnet's distribution arm, Avnet Partner Solutions (formerly known as Avnet Hall-Mark), saw smaller revenue gains than the so-called broadline big three, the company had a banner year with its biggest vendor, IBM.

Avnet threw its support behind IBM in an effort to build sales, and the strategy has produced numbers like 44 percent growth in software and 33 percent growth in servers this year. With roughly $2 billion in IBM sales, Avnet is now the biggest distributor for Big Blue.

Arrow: The enterprise distributor showed exceptional double-digit revenue jumps in 2004, including a 40 percent gain in the first quarter. On top of that, Arrow also posted its highest sales and earnings in three years during the second quarter, with income of $66.9 million after $2.75 billion in revenue. Like other distributors this year, Arrow stepped up its presence overseas with the purchase of Disway in Europe.

Access Distribution: Changing its name from GE Access, the Westminster, Colo.-based enterprise distributor showed strong sales improvement from Sun Microsystems, its biggest vendor, while emphasizing security and adding new vendors, such as Computer Associates and McAfee.

Westcon Group: New CEO Tom Dolan took over the Tarrytown, N.Y.-based networking distributor in the spring, just a few months after the company filed an IPO seeking $115 million in investments.

While the IPO has yet to come to fruition, the distributor is boosting sales behind major vendors, such as Cisco and its VoIP technology.

D&H Distributing: The 86-year-old distributor, based in Harrisburg, Pa., continued expanding its operations in 2004 as storage sales grew a whopping 64 percent. D&H Distributing's gaming and systems-builder businesses also made significant headway.

ScanSource: The specialty distributor, headquartered in Greenville, S.C., arguably had its best year ever in 2004, showing year-over-year sales growth of 29 percent or better for its three quarters during the calendar year--and all were record revenue numbers. The company, which had traditionally focused on point-of-sales and data-capture products, has aggressively built up its RFID efforts and launched a new security technology division as well.