Sun Channel Will Shine Bright After Access Sales

The proposed $425 million deal would for the first time put Sun's largest distributor into the hands of an organization focused on the high-tech channel, said Sun executives and solution providers.

However, some solution providers said the move is not without risks for a large number of Access' customers that depend on financing from Access to remain solvent.

For Sun's channel partners, the acquisition was no surprise.

Access has been the subject of sale rumors almost as soon as it was purchased by GE as part of a larger deal in the mid-1990s. The distributor, formerly known as Access Graphics and then GE Access, has been linked to just about every IT distributor because its business differed from other GE units.

But Access and Avnet executives insist the company was only put on the market a few months ago.

Once the deal is approved, a key change for Access is it will become a stand-alone business under Avnet's distribution-focused umbrella, as opposed to a disparate, minor group in a much larger conglomerate.

"We all knew the rumors," said John Varel, CEO of FusionStorm, a San Francisco-based Sun partner. "I'm not surprised. I figured GE wanted to be in different businesses, but high-tech distribution was not their first love."

Mark Teter, CTO of Advanced Systems Group, a Denver-based Sun partner and one of Access' top solution provider customers, said the move makes Access a part of a true distribution company and brings a top-notch organization to Avnet.

"Avnet's getting a great sales and distribution organization," Teter said. "The move's not a big surprise with all the consolidation going on in distribution."

However, Access' business took a hit recently when Sun decided to cut the distributor's rebate on maintenance renewals, said one solution provider, who requested anonymity.

"Perhaps Sun's announcement that it was cutting reseller and CDP [channel development partner, Sun-speak for distributor] returns on renewals was the final straw to push GE to push the button on Access," the solution provider said.

Another solution provider said it is still hard to understand why GE ever acquired Access in the first place. "My personal thought is that GE never liked the business," the solution provider said. "It's a low-profit, high-risk business. Access was even more at the mercies of Sun than we are. They have lower margins than we have. And it was hard for Access to pick up other vendors. I just didn't think it was smart of GE to get into distribution."

Tom Kuni, president of SSI hubcity, a Metuchen, N.J.-based Sun solution provider, said he and his peers will also be watching what happens to a handful of Sun solution providers for which funding from Access and its GE parent has meant survival.

"Unlike in 'Star Trek,' Access has artificially interfered with the natural culling of the herd," Kuni said. "I've always said Access performed an unnatural act by holding the notes of its resellers for so long. I wouldn't want to be a reseller whose note is being held by a distributor that will no longer be around. It always amazed me that no one saw a conflict of interest between Access selling Sun products and GE doing a lot of financing of Sun sales."

Varel, whose company acquired Cat Technologies more than three years ago as a result of Access' push to close some of its underperforming solution providers, said he is actually grateful for the help he got from Access because it gave him relationships with companies such as EMC and Cisco Systems that he did not have before.

"Venture capitalists wanted to put Cat into foreclosure," Varel said. "GE wanted to excuse their debt. They approached us to help take the debt. We negotiated very favorable terms to take over their trade payables."

Meanwhile, the merger enhances Avnet's Sun relationship, which started last year when Sun bought StorageTek.

At the time, Avnet was StorageTek's largest distributor, and many of Avnet's solution providers were relieved when Sun not only kept the Avnet relationship, but also expanded it this summer by authorizing Avnet to take on part of Sun's server line.

Don James, CEO of Bear Data Systems, a Belmont, Calif.-based solution provider who buys Sun's StorageTek products through Avnet and is considering a deeper relationship with Sun, said the acquisition of Access actually makes that more of a possibility.