Avnet Strikes Another Deal, Forms New Company With Calence

Avnet announced Tuesday that it is spinning off its Avnet Enterprise Solutions networking business and combining it with Calence. The new company, Calence LLC, will be headquartered in Phoenix and will be composed of employees and resources of both Calence and Avnet Enterprise Solutions (AES), which specialized in network life-cycle management, as well as wireless, security and IP networking solutions. The new solution provider will be jointly owned by Avnet and Calence and will be run by current Calence chairman CEO Michael Fong, who founded Calence in 1993, while Jim Teter, president of AES, will serve as COO of Calence LLC.

"This creates the largest pure-play [networking VAR] in our space," Fong says. "We're very excited about moving this company forward."

The combination of Calence and AES gives Calence LLC approximately 400 employees with 20 offices across the United States and around $300 million in combined annual revenues. Fong says Calence had been looking at a number of companies to partner with to grow the business. While Calence had never had a partnership with any part of Avnet before, the two companies were familiar with one another because both are headquartered in Tempe, Ariz.

Steve Tepedino, president of Avnet Technology Solutions, says the two companies share strong networking competencies, especially around Cisco, but bring two distinct customer markets together; Calence specializes in the K-12 education market, while AES is stronger in the commercial space.

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"It's a perfect match," Tepedino says. "There's great synergies between the two companies in the networking solutions space, but the biggest difference is our diverse customer bases."

Fong says Calence LLC will concentrate more on building up its commercial client base in the midmarket.

"There's a growing opportunity for network outsourcing and BPO services below the Fortune 500," Fong says. "We think the real sweet spot for us will be the midmarket."

While Calence LLC will operate independently from Avnet, the two companies signed a five-year outsourcing agreement. Calence LLC will provide Avnet with network BPO services and manage Avnet's voice and data networks, as well as its telecommunications expense-management support.

With its HP solutions business sold to Logicalis and now its AES business spun off, Avnet looks to focus its attention on tier-two distribution through its Avnet Electronics Marketing and Avnet Technology Solutions divisions. Earlier this year, Avnet acquired Memec, a semiconductor distributor with $2.3 billion in sales for 2004, for approximately $676 million in an effort to grow its distribution business overseas, particularly in Asia Pacific.