Seagate Takes Axe To VAR Channel

The dramatic changes could leave hundreds of partners in the lurch, opening the door for Seagate competitors such as Western Digital to swoop in and capture channel market share.

One large custom system builder said his rep told him that Seagate was scuttling its reseller channel entirely.

The system builder, who asked not to be named, characterized the decision as "shortsighted" and said it would "force us to look at Western Digital more."

He said he understood Seagate's need to cut costs but was "baffled" as to why the company would lay off its entire channel team instead of trimming it. The move amounted to "completely changing their business model," the source said.

VARs said they are concerned that Seagate's channel program could be disbanded in the wake of the channel cuts.

Sources told Channelweb.com that Seagate's entire VAR sales team and channel marketing team has been laid off, including Jim Carlson, a 35-year company veteran and Western region sales director, and Jim Phelps, a 25-year veteran and executive director.

All told, the source said 14 VAR salespeople and four channel marketing employees were let go.

Most of Seagate's channel business goes through the system-builder community, while solution providers who sell Seagate drives to go with their arrays from storage vendors such as Hewlett-Packard buy those drives from those vendors.

It is absolutely not true that Seagate eliminated the entire channel sales and marketing teams, said Woody Monroy, director of corporate communications at Seagate.

About 40 percent of Seagate's business goes through indirect sales channels, and 60 percent through OEMs, Monroy said.

On May 13, Seagate announced a restructuring plan that includes a layoff of about 1,100 people, or about 2.5 percent of its global workforce. That layoff was across all functions of the company, Monroy said.

"Some people were impacted on the channel sales and marketing team," Monroy said. "But to say Seagate cut the entire team is absolutely not the case. It's 40 percent of our business. We are committed to our channel customers and to strengthening our ability to serve them and make Seagate the easiest company to do business with."

Seagate is declining to discuss specific numbers of people laid off from the channels team, and is not discussing the layoff of specific individuals out of respect for them, Monroy said.

"I'm sure they don't want their names out in public," he said. "If they are laid off, they may not want it announced publicly. And if they weren't laid off, they may not want their names associated with possible layoffs."

Currently, John Vossoughi, vice president of Americas sales and marketing, is handling channel sales as well as some direct business, Monroy said. He reports to Kurt Richarz, executive vice president of global sales.

In an e-mailed reponse to Channelweb.com, Vossoughi commented on the changes.

"Given the macro-economic reality, Seagate was forced to 'right-size' our expense levels and, as a result, we reduced some of our 'pull-through' field sales organization in the U.S. channel," he wrote. "However, we continue to maintain a very strong and extremely talented team, focused on our most critical business segments that are served through the channel. For those customers who we do not call on directly, we plan to fully utilize the services of our distribution network complemented by our award-winning online partner portal.

"On the distribution consolidation question, we are not in a position to comment," Vossoughi added.

An Arrow spokesperson confirmed in an e-mail that the distributor is no longer distributing Seagate products.

"Arrow will simply be returning to a previous business model we had with Seagate that allows us to support our customers that require Seagate products. Arrow retains full access to Seagate products used in our systems integration business, which is where we sell Seagate products. Beyond that, we don't comment on our business relationships with our suppliers and customers," the spokesperson wrote.

Tech Data did not respond to requests for comment.

Monroy also said he did not have information on changes to Seagate's distributor relationships.

While Seagate insists it has not dumped its entire channel sales force, spot checks with several white-box builders around the country indicate that the company does not appear to have many sales reps left for partners to call on. Some sources in the vendor's white-box channel said their Seagate reps personally informed them in the past week that their relationship would be ending.

Damon Poeter contributed to this article.