Sun VARs: Acquiring Access Right For Avnet

Sun Microsystems' channel partners, along with the vendor itself, said they expect Avnet's pending acquisition of Access Distribution to benefit Sun's channel as it brings the vendor's largest distributor into the hands of an organization focused on the high-tech channel.

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

For Sun's channel partners, the acquisition was no surprise. Rumors have been swirling around the channel that Access would be picked up by either Avnet, which earlier this year picked up a part of Sun's server distribution business; the MOCA division of Arrow Electronics, which is Access' key competitor in the U.S.; or Synnex, whose North America president and COO, John Paget, was formerly the CEO of Access.

A key change for Access as part of Avnet will be taking Sun's biggest distributor from being part of a huge conglomerate to being a stand-alone business under a dedicated distribution organization.

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"We all knew the rumors," said John Varel, CEO of FusionStorm, a San Francisco-based Sun partner. "I'm not surprised. I figured GE [General Electric] 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 in half the distributor rebate on maintenance renewals, said one solution provider, who preferred to remain anonymous.

"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."

NEXT: Did Access Financing Prop Up Weak VARs?

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 whom 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 over 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 like EMC and Cisco that he did not have previously.

"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."

Avnet first got a taste of being a Sun partner last year when Sun acquired storage vendor StorageTek. Avnet at the time 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 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 product through Avnet and is considering opening a deeper relationship with Sun, said the acquisition of Access actually makes that more of a possibility.

"This will probably help us pick up the Sun server line," James said. "We have a long relationship with Avnet."

Sun believes the acquisition of Access by Avnet is good news for the channel, said Jeff Barteld, director of U.S. channel sales for Sun.

"Access Distribution has been our largest distribution partner for years," Barteld said. "We have no complaints about GE, but Avnet is focused exclusively on distribution."

The fact that Sun had already started a relationship with Avnet via its StorageTek line made it easier for Sun to look at how to work with Avnet once it closes its Access acquisition, Barteld said. "As Avnet starts to take over Access, Sun is very comfortable with Avnet," he said. "Our comfort level with Avnet is well developed at this point."