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Ingram Micro Exec: Proposed Chinese Ownership Won't Hurt Our U.S. Federal Business

Ingram Micro does not hold contracts or sell products through its public sector practice that require a security clearance, according to a memo by U.S. chief executive Paul Bay.

Ingram Micro U.S. chief executive Paul Bay said that being part of Hainan, China-based HNA Group will have no impact on the distributor’s robust U.S. government business.

"The merger announced this week has no bearing on our standing as holders of a [General Services Administration] schedule or any effect on any of our customers who hold their own GSA schedules," Bay wrote in an internal memo filed late Friday with the U.S. Securities and Exchange Commission. "As a result, we expect no changes to our vendor or partner relationships."

The HNA Group has assured Ingram Micro that neither it nor affiliate Tianjin Tianhai has any direct ownership stake held by the Chinese government, Bay said. HNA Group is the largest stockholder in Tianjin Tianhai of Tianjin, China, which announced plans Wednesday to acquire Irvine, Calif.-based Ingram Micro for $6 billion.

[Related: Ingram Leaders: HNA Deal Will Make Us More Financially Flexible With Partners]

Ingram Micro and Promark -- a public sector-focused subsidiary acquired by Ingram in 2012 -- do not hold contracts or sell products through its GSA schedule that require a security clearance, Bay said. Instead, all of the products sold through Ingram Micro's public sector and GSA businesses are entirely commercial in nature, according to Bay.

"Many companies in our industry are either owned outright or held by foreign nationals, such as China – Lenovo and Synnex – to name a few," Bay said in the memo in an apparent attempt to reassure worried vendors, solution providers and investors, [Editor's Note: Synnex is not "held by" Chinese ownership. Synnex's largest shareholder is MiTAC International, a Taiwan-based company that holds a minority 24.9 percent stake, according to a recent filing with the U.S. Securities and Exchange Commission.]

Bay on Friday told his staff to "make a point today" to reach out to vendors and solution provider customers that work with the distributor's public sector team and assure them that Ingram Micro will continue serving their business even after it's owned by Tianjin Tianhai.

As part of the HNA Group, Bay said, Ingram Micro will continue to look for opportunities to expand its partnerships with vendors and solution providers interested in doing business with the federal government. Ingram Micro uses a two-tier GSA schedule, Bay said, meaning that all engagements come through a partner rather than directly through Ingram Micro.

Ingram Micro does not anticipate any changes to its management team or associates after it becomes part of HNA, including the CEO position, where Bay said Alain Monie will continue to lead the company. The distributor will additionally not be making any changes to its systems or the integrity of its data, Bay said.

Knowledge Information Solutions (KIS) thinks its run rate business will be just fine, as the company, No. 449 on the CRN 2015 Solution Provider 500, does not work in any sensitive areas of the federal government and is involved in delivering only products rather than services, said company President Augie Riolo.

"I don’t think there will be any impact," Riolo told CRN. "It's early days, but I don't see any difference at this point."


KIS works exclusively with the federal government, and Ingram Micro is its primary distributor in the space.

FedBiz IT Solutions reached out to its contact at Ingram Micro on Monday morning, and was told that the distributor anticipates some concerns from the federal government but plans to work through them, according to Don Tiaga, president of the Leesburg, Va.-based company.

"This does raise some issues," Tiaga told CRN. "My biggest concern is the government is going more and more toward a secure supply chain."

FedBiz IT deals exclusively with the U.S. government and sources 10 percent to 20 percent of its business through Ingram Micro, meaning any disruption would have deep reverberations for Tiaga's company.

"If the U.S. government looks at it and thinks Chinese ownership is a problem, then it's a problem," Tiaga said. "I don’t know how the government will see it."

A Washington, D.C.-area Ingram Micro partner executive who does a good amount of software sales to the U.S. government through the distributor told CRN Monday that the distributor still hasn't gotten in touch with him regarding the impact of the Tianjin Tianhai acquisition.

"This is not good news," said the partner, who did not want to named. "I'm worried about the impact on our business."

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