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ScanSource Targets More Government Business Via Channel After Solid Quarter

ScanSource CEO Mike Baur says his company is taking a new look at pumping up more government business following a big deal landed by KBZ, the Cisco distributor ScanSource acquired last year.

ScanSource will look to build its local, state and federal government business through its reseller customers after the distributor reported huge success for its latest quarter after its acquisition of Cisco distributor KBZ.

In its second quarter 2016 earnings call, held after the close of the market Tuesday, Greenville, S.C-based ScanSource said the acquisition was directly responsible for landing a deal that pushed revenue about $13.5 million past the top edge of its guidance estimate for the quarter. That deal was worth $38 million.

ScanSource CEO Mike Baur said in an interview with CRN that the company will reevaluate its investment in the local, state and federal government verticals thanks to the success it saw in the space from October to December. He added that the company will look to its resellers to pick up that extra business.

[Related: ScanSource To Buy $225M Cisco Videoconferencing Distributor]

"That platform - to go after government business through resellers - we believe we can deploy through our other vendors and other technologies. That is one area we will be looking at more in 2016 and ’17," he said.

ScanSource acquired KBZ in August 2015, buying the $225 million Cisco videoconferencing distributor boost its alignment with Cisco offerings in North America.

KBZ utilized the stability and strong back-office solutions of ScanSource to sign a deal that, according to Baur, it might not have been able to sign previously.

"KBZ, before our acquisition, maybe wouldn’t have been able to pull off this deal," he said. "We really saw the synergy."

Although ScanSource generally leaves acquired companies to run their own sales and marketing engines, Baur said, his company adds a strong balance sheet and back-office efficiencies that allow companies such as KBZ to go after more sophisticated, larger transactions like the one they won during the quarter.

ScanSource stock jumped about 17.5 percent Wednesday, a day after its earnings were released.

In its second-quarter report, the company said revenue rose 23 percent to $993.5 million from $807 million in the second quarter of 2015. Earnings also rose 23 percent, to $20.7 million from $16.8 million.

Baur said ScanSource saw growth across the board with the company's continued success in South America sales and with North American POS and security business sales.

Baur added that one of the most promising areas for ScanSource is coming from "chip and pin" technology, a business that has doubled over the same quarter last year. ("Chip and pin," is replacing VeriFone technologies throughout all point-of-sale machines.) But Baur added that some market research suggests that 65 percent of the market has yet to buy the technology.

"This will be a multi-year opportunity for our channels," he said.

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