VARs Expect Smooth Arrow-KeyLink Integration

Melville, N.Y.-based Arrow so far hasn't indicated how the $485 million acquisition of KeyLink will be integrated into its operations, other than saying its field-sales force will remain intact. Yet Arrow CEO William Mitchell said Wednesday on a conference call with analysts that integrating companies is one thing his company does very well.

"There are teams that meet daily, war rooms all over Arrow that track our progress," Mitchell said. "We will ensure with proper focus and resources that all of these [acquisitions] are integrated and seamless very, very quickly."

And solution provider partners of the companies expect the integration of KeyLink into Arrow to proceed seamlessly.

"The [KeyLink] folks I spoke to feel that Arrow lets its [acquisitions] run independently without a lot of changes. KeyLink has been an outstanding partner. I think they will continue their very good service with Arrow," said Craig McClusky, worldwide director of sales at PCPC, a Houston-based solution provider.

McClusky said KeyLink called him at 6:30 a.m. Wednesday to relay news of the acquisition. "I don't have too many concerns. There's consolidation all over in the industry. We're actually excited. I think it's a good partnership that could get even better," he said.

Troy Webb, chief marketing officer and managing partner at InCentric Solutions, a Morrisville, N.C.-based IBM and Arrow partner, said the deal should bring better support for his company.

"My networking should increase fivefold with other partners and with IBM now. I should have a better network of technical people," Webb said. "Hopefully, they will keep all the 'A' players, and there should be more investment dollars from IBM to make a little company like mine grow. All that's got to be on the good side."

On the analyst call, Arrow executives said the company would explore cross-selling opportunities through its acquisitions, but Webb said he hasn't seen that in practice yet.

"I look forward to that, too. We want to be best-of-breed. Multiple [vendors] and multiple programs from a single source is good," he said. "We've been very faithful to [IBM's] smallest distributor. Now we're the biggest one. We know all the Arrow people, and they know us. That can't hurt us."

Arrow may keep many KeyLink sales and support staff because it had the bigger IBM business. In addition, Arrow's IBM sales force has weakened over the past year because of several employee departures, according to one solution provider.

"[KeyLink executives taking over] won't be a shock to the Arrow partners because a lot of good people have left the company anyway. It's sort of good timing, considering that," said the solution provider, who requested anonymity.

Arrow customer Dave Butler, president and CEO of Mission Viejo, Calif.-based solution provider Enterprise Computing Solutions, said he thinks working with fewer distributors will be a boon to his company.

"We're very pleased to consolidate our sourcing of products. When you buy from separate locations, you're dealing with different finance groups," Butler said. "Part of our challenge as a reseller or partner of these major manufacturers is keeping our costs down. For me to run a profitable business, I have to keep my cost of operations down and that's one of the areas. I'm very pleased with that [Arrow-KeyLink] announcement."

But at least one large KeyLink and Hewlett-Packard partner doesn't like that its choice of distributors has been narrowed. Don Richie, president of Sequel Data Systems, Austin, Texas, wants HP to add a third distributor again.

"My concern is that it will create almost a monopoly where the partners end up losing, because now the vendors can be so rigid on pricing and know there's no place for you to go," Richie said. "Will we see a cutback in services and an increase in costs? You keep hearing that they are adding all this value. What does that mean? At this point, the verdict is still out. There are more and more questions to be answered."

Arrow executives hope to allay those concerns over the next three months and said a smooth integration is in the best interest of all parties.

"What we plan to do is take the best of both [companies], as we have tried to do in the past," said Cathy Morris, co-president of Arrow Enterprise Computing Solutions. "Over the next 90 days, we will evaluate how both companies go to market. Our No. 1 objective is to not have disruptions in service to our suppliers and customers. How that will work, it is premature to comment on that."

Morris and Kevin Gilroy, also co-president of Arrow ECS, flew to Mexico Wednesday to attend a previously scheduled shindig for some top KeyLink partners. They said they were met with an enthusiastic response in their limited exposure with attendees before the event began Wednesday night.

"I've met a few in the lobby and out by the registration table. They all seem excited," said Gilroy, who celebrated his first day on the job with Arrow on a plane to the event. "One of the reasons I joined is the drumbeat [feeling here]. You can feel the momentum building," he said.

*Story updated with additional VAR and Arrow comment.