Q&A: Synnex CEO Talks PCs, Mobility, Vertical Markets And More
What's Next For Synnex
After posting impressive growth numbers in its second-quarter earnings, with 33.3 percent sales growth and 28.5 percent net income growth over the same quarter the year before, Synnex CEO Kevin Murai sat down with CRN to discuss what's on the horizon and what a solution provider can do to take advantage of it all. Here's what Murai said.
It looks like Synnex had a strong quarter in many areas, what was the most exciting from your point of view?
At the highest level really two main things. Number one is, once again, we had amazing growth in our technology solutions business and 24 percent across the board and, really, contributions from all three countries, the U.S., Canada and Japan. That's exciting. I think what that speaks to is our execution, really having the right go-to-market strategy, the right partners and really finding growth. And then on the Concentrix side of the business, we closed much of the acquisition. There's still a handful more countries to go through, but we completed our second wave of closures of countries and we now have about 99 percent of the business moved over. The overall performance in Concentrix was excellent, well on track to where we needed to be.
A lot of investors seemed concerned about Q3 numbers projecting less growth than Q2. What would you say to them?
I think our guidance is actually quite strong for the next quarter. ... We're still looking at double-digit growth in our technology solutions business on a year-to-year basis, which to me is very strong growth. Japan enjoyed 40 percent growth in Q1 and in Q2 on a year-on-year basis. There were specific reasons for that. We're also entering Japan's seasonally softest quarter, coming into Q3. We do expect to see the impact from both of those changing into Q3. That is actually one of the drivers that we were talking about, but overall the demand environment we feel really good about.
Are you seeing strong sales of PCs? Does the Windows XP support expiration continue to be a factor?
PC sales have been very, very strong, especially with the Windows XP support expiring. We saw great benefit from that. Really, I think it had the impact of raising the water level of demand across a broader range of IT products. We saw benefit pretty much across the board, but obviously the PC segment of both notebooks and desktops were a very strongly performing segment. That was strong this past quarter as well. We are starting to see the positive impact from Windows XP start to subside right now, but the good news is the overall water level is still higher; we're still seeing very strong demand there across the board.
What other technology areas saw strong sales?
Beyond [PC sales], it is pretty much across the board. Mobility products -- in particular, tablets -- are doing very well. The infrastructure piece, the networking and security, have a much more heightened visibility and attention in particular beyond just the IT group now. That's a growing category. Associated with networking of course is the Wi-Fi campus deployment, that's grown. The peripherals were good drag-alongs as well. That was a strong growth category too.
What's the case with mobility? Is it just growth around tablets or something else?
Our enterprise mobility business is doing well, which really is focused around the connected devices piece, the movement piece, the underlying network and that, by the way, is the combination of both wired/wireless as well as the 4G LTE wireless, and then management of that entire device ecosystem. That business, which is a dedicated focus that we have under enterprise mobility, is continuing to grow very, very well. It's a relatively small business in the grand scheme of Synnex today, but the growth numbers are huge. ... That business is doing very, very well for us.
What is the biggest market you're seeing for mobility growth?
In particular, K-12 ... or at least education, is a strong growth area for us. It actually continues to be a big focus. A couple of the vendor partners that we have with us have a joint focus on that space, and that's Microsoft on the one hand as well as the new work that we're doing with Google on their Chromebook and Chrome Management Console. That is a fast-growing market from a technology perspective, the adoption of tablet devices, but the solution that we're taking to that market in conjunction with our resellers is you also have to take a look at the overall infrastructure. Wi-Fi campus deployment is also a key piece of what we're doing.
Will demand dwindle any time soon for mobility?
There is still a lot of gas in the tank for enterprise mobility. I often get asked the question, how do you view the relative growth between tablet devices and smartphones and notebooks. ... I think what's going to happen is that there's going to be a convergence of those devices and it's really going to be a mobile device that is going to have significantly more computing power ... I think it's just more and more devices we're going to sell, which is going to drive a lot more connectivity, a lot more management and security requirements, that's going to drive all of that entire infrastructure piece. I see that as a continuing, growing trend.
Where is the next opportunity in the world of mobility?
One area that tends to be forgotten sometimes that we are focused on is the machine-to-machine area. Beyond the devices that you use yourself, multiply that and that's what we're seeing in terms of the growth of things like sensors. Whether there are cameras attached to the Internet, whether there are other security or surveillance-type sensors or energy monitoring sensors or health monitoring sensors, the growth of machines connected is going to be much more rapid and, actually, that entire market is probably already bigger than smartphones and tablets combined today. You need the infrastructure to put that on, you need the storage, this is where big data analytics comes in too, but you also need the security layer. That's a huge growth area and that's an area that we're focused on too.
What other vertical markets are seeing big demand boosts right now?
Education I just use as an example, but that certainly is very strong. One layer up from education, state local is also very, very strong for us right now. I think that entire market is strong. We are seeing funds being spent against technology, obviously driving for higher levels of productivity. Beyond that, SMB continues to be very strong. It is really the sweet spot of where we service as a company and where our resellers play. Obviously a lot of the success that we've had in our top-line growth is attributed to strength there. The retail business has been very strong too.
Will those big-demand markets continue to grow for a long time? Or are they approaching a saturation point?
It's hard to say what will happen as we get too far out there a year from now. But, there are enough catalysts I think that are happening right now that the overall demand just feels better than it did a year ago. I think just the base demand is stronger. In conjunction with that, more excitement and spending around enterprise mobility -- the Windows XP support expiration certainly did help but moving forward the infrastructure piece in communications and security and then Windows server expiration coming up next year could add yet another boost. There's a lot of things happening right now that you could view as a catalyst to continued growth.
What sort of advice would you give a solution provider so they don't miss out on any of this opportunity?
The advice that I always give is to go narrow and deep. Don't try to be everything to everybody. Really figure out where your true competencies are and identify it by both the markets that you serve and the technologies that you know, and then create the right kind of solutions. Also, bring on the right service capability in order to provide the right results to your customer. At the end of the day, we're selling technology, we're selling technology solutions, but ultimately, in the commercial market, the reason that you get the sale, the reason that you're able to drive growth is because you are creating value by increasing efficiency or creating other forms of value. That's really where you need to focus.
What about the other side of the equation–what is Synnex doing to distinguish itself from other distributors?
Number one, for us it's always come down to the broad umbrella of execution, but it goes well beyond that. Relationships are so key. Truly caring about the health of our customers and truly caring about growing our vendors' business. I think that's where we do differentiate ourselves. Ultimately, I don't want Synnex to be known as another source of supply. If our customers view us as a strategic business partner that they are dependent on in order for them to be successful, that makes me happy. If we're the go-to distributor from a vendor's perspective because they know we get the job done, we can execute and help them grow, that brings a smile to my face. That's how I think we differentiate more than anything.
Sounds like Synnex thinks there's a lot of opportunities on the horizon. Are there any challenges that solution providers should be prepared for?
Change, any kind of change, is going to bring both opportunity and challenge. As a company, we face that. We've got to try to navigate through all of that and figure out what we need to change, what we need to do in order to play in the new world. But then again, our vendors and customers need to do that too. What we're doing is we're making investments in platforms and capability that also help to bring our resellers along too. ... What we try to do is help our resellers along, help them identify and at least educate them on our view on how we see things changing and help them get to that next new place.
Are resellers turning to distribution to find out those answers to market challenges?
It's interesting. We do a number of things, where we get in front of and train our resellers, starting with our annual event, which is our national sales conference in Greenville. ... We also have our Varnex community and we do two conferences a year and then we do a number of different road shows. A big part of the agenda in all of those different conferences that we do is our seminars in technology platforms and training. We will have seminars on here's what's happening in security, here's what's happening in enterprise mobility, here's how you can establish a practice in some of these areas.
What's the bottom-line message from Synnex for the quarter?
Overall, I hope the message came across that we're very positive on the technology market right now. I think we're investing in the right areas and we're doing the right things and ultimately our success is based on how successfully we can grow our vendors' business, how successfully we can help or we can make our resellers. It really is a three-way ecosystem with us. I'm just happy that we're all enjoying success together.