A 'CARDINAL SIN'
It's unclear when exactly Torrey Point began moving Juniper products to Cisco. The documents obtained by CRN show purchase orders and invoices from PHW and Cisco starting in 2010.
Sources also say Torrey Point's secret relationship with Cisco was extremely lucrative for the solution provider. While Torrey Point's legitimate Juniper business was growing rapidly, it was turning a substantial profit on selling gear to Cisco on the side. According to several sources with intimate knowledge of the situation, Torrey Point received often-substantial discounts for Juniper products via special pricing arrangements with the vendor. Those sources also say Torrey Point was at times making 50 to 60 points of margin on the Juniper sales to Cisco.
The PHW sales weren't limited to Cisco, either. After establishing a clandestine relationship with Cisco in 2010, records show Torrey Point, through PHW, also made sales to Alcatel-Lucent. According to documents obtained by CRN, PHW quoted $1.6 million worth of networking product for Alcatel-Lucent on a single day in October 2011—and the orders were for Cisco products, not Juniper.
Evidently, Torrey Point was engaged in a web of agreements with networking vendors, selling equipment to the highest-bidding competitor. Alcatel-Lucent, ironically, was both a beneficiary and a victim of this practice.
Alcatel-Lucent has not responded to requests for comment. While Torrey Point's sales to Cisco and Alcatel-Lucent were not illegal, they did constitute a blatant violation of the solution provider's reseller contract with Juniper, Arista and Alcatel-Lucent. A standard reseller partner agreement expressly states that a partner is prohibited from selling or delivering a vendor's product to any of the vendor's competitors.
"There's a lot of pressure in the reseller business, and you have to be creative sometimes," said a former Torrey Point engineer, who wished to remain anonymous. "But there's bending the rules and then there's breaking the rules."
CRN spoke with several executives in the IT industry and channel about the Torrey Point matter, and the consensus was that a partner occasionally breaking its reseller agreement to sell the vendor's gear to the competition is not at all uncommon; in some cases, they say, a vendor may look the other way if it's an isolated incident.
In that respect, selling a vendor's products to the competition is like a baseball player stealing signs or using too much pine tar: a lot of people do it, and you can get away with it if you don't flaunt it or take it too far.
But what is uncommon, executives say, is for a top-level, partner-of–the-year-caliber solution provider to engage in such a practice with the volume, scale and duration of time displayed by Torrey Point. One solution provider who asked to remain anonymous said the selling of any products, let alone beta and pre-release technology, to competitors is "a cardinal sin in the channel."
NEXT: Torrey Points Death Sentence