Synnex CEO Talks Services, HP And Tablets

Synnex reported solid third-quarter financial results Tuesday, after which CEO Kevin Murai spoke with CRN's Scott Campbell about the distributor's performance, its Hewlett-Packard relationship and the future of tablets in the commercial sector. The following are excerpts from the conversation:

Synnex reported 18 percent growth in the third quarter. Can you break down where that growth came from?

Distribution did very well. In the U.S. and Canada, the comments we made were that we're starting to see pickup on the consumer side of the business, which had been soft since the beginning of the year. Commmercial continues to be pretty solid. In particular, some of the focus areas that we've grown, like enterprise servers in particular, networking and some other technical groups.

At 18 percent, it seems demand is there but you must have also taken some market share too, right?

"The 18 percent includes the entire business and you have to account for acquisitions. If you net that out, distribution [growth] was around 8 percent, which is still better than the overall market. We believe in high growth segments, which are doing very well, and it's likely we earned some share too.

In addition to enterprise servers and networking, can you talk about some of the other high growth areas and maybe what kind of growth you saw in each?

I can't get too granular there. Networking was solid. The services part of the business, whether we're talking about professional services or managed services, was strong. And our pro A/V business experienced good growth.

How about a little more detail on the types of services that were strong?

We have our managed services platform and we offer a number of professional services like data center assessments that we use to append our VARs technical capabilities. We sell them at low rates to enable resellers. Because once that's done, the reseller and us enjoy more benefits which generally translates to a refresh of [hardware].

You mentioned on the call with analysts that you've worked with Hewlett-Packard to protect market share. With HP's announcements around PSG, did that involve getting more price aggressive than normal to protect that share?

There's a number of tactics that anybody would use in their bag of artillery. That said, understanding how we work with them or any strategic vendor we have, we are taking the right message back to the marketplace and continue to instill confidence in the future of the business. HP is the number one player in the PC space. They're a very important partner to us.

What percentage of your business is HP now?

Of our total business, it's around 37 percent.

You also mentioned that after some initial turmoil around HP and its PSG future, sales quickly reverted back to normal for the rest of the quarter?

The dust settled pretty quickly.

Next: Consumer Tablets Create Challenges For Commercial Customers

You also mentioned to analysts that you think the tablet opportunity in the commercial sector will be there the next few years and not necessarily the next few months. Does that mean a slower adoption than the consumer and if so, why?

First of all, the growth trajectory takes more time in the commercial space. Part of it has to do with overall acceptance. Both the IT organization and different business units have to embrace it to accept a truly integrated solution. Also the integration itself takes time. The mobile apps development team we have is enabling in the market.

The final piece is the transition to how client devices will work going forward. In the past, most enterprises said, 'Here's the desktop or notebook specifications you will be assigned, go and image it.' Starting now, we're starting to see a bring-your-own-device to work [adoption] and it's up to the IT organization to qualify it and have you use it within the organization. It's creating challenges for the commercial space. You see the blurring of the lines of those units sold through traditional retail solutions making their way into the commercial space.

So that's one way for corporations to save money: have their employees buy the equipment.

That's not the intent of what I'm saying, but it is happening.

You've talked about the tablet line card you have [including Motorola, Samsung. Asus, Acer and Lenovo]. How happy are you with that portfolio and do you expect it to increase?

We're happy with the lineup of mobile devices we have. The obvious gap in the U.S. is not having the iPad. We have it in Canada. Beyond that, we have a rich assortment of other tablets and mobile devices.

Do you anticipate a lot of consolidation in the tablet space, with vendors entering and exiting the space, which might cause some confusion in the market?

Great question. My expectation is the major tier one manufacturers that have been firmly implanted in the PC space will likely continue to have one. We're also seeing the emergence of the more legacy phone device manufacturers entering the tablet space. So I see it happening from both directions. We support Motorola and Samsgung tablet lines as well.

Perhaps a better question is rather than hardware consolidation, do you expect a consolidation among the operating system platforms that tablets are using?

There's no question that iOS has a lot of longevity to it. Their market share is very large. Android is very large as well. When you take a look at the significant others, Microsoft comes to the top of the list first. It will be interesting to see if there's room for three or four OSes and how much each will able to gain in share over the next year and can they put a stake in the ground and gain share going forward.