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Editorial: Buying and selling

Editorial: Buying and selling

While there are plenty more fish in the sea, it is difficult not to think Cellnet has missed a major opportunity in failing to meet Dicker Data's asking price (see page 1 of the August 16 2006 issue of ARN Magazine). That is presuming, of course, that the asking price was a reasonable one.

You could probably count on one hand the number of IT distribution businesses that would not be up for sale if the price was right. But there are very few that can offer the major volume boost in existing brands that Dicker would have given Cellnet.

Another that could fit the bill is NSW-based Bluechip IT. A national player in its own right, it would help Cellnet improve its geographical presence and would more than double its current Acer numbers.

When news of Cellnet's acquisition plans first broke, I suggested meeting seller valuations would be the biggest stumbling block.

It is a Catch-22 situation in many ways - struggling businesses can be picked up for a song but are not attractive; successful ones must be tempted with a bid that is over the odds because they have no pressing need to get out.

Cellnet would surely be better off paying top dollar for a significant competitor than breaking its budget into bite-sized pieces and picking up a collection of small players.

The other big story in this week's issue is the reseller review being undertaken by Synnex (see page 1 of the August 16 2006 issue of ARN Magazine). Despite saying it would be more than happy to pick up accounts discarded by Ingram Micro, it seems the Melbourne-based distributor has plans to trim its own fat.

Managing director, Kee Ong, stressed the focus of its dealer review was to win a greater share of spending with its smallest spending partners. But the fact that two of the country's three biggest distributors have moved to close inactive, invalid or low-spending accounts has opened up an industry-wide debate about the definition of a reseller.

Despite the continued fall in average selling price, a number of trends in recent years have lowered barrier to entry and made it easier for dealers to survive on ultra-thin margins.

For example, they no longer need to hold stock because distributors ship direct to users. The shift to online has also made small businesses look larger and more professional.

But while these developments have helped a lot of genuine resellers stay afloat, they have also given rise to an increasing number of one-man band operations that are reselling IT equipment as a way of making extra cash in their spare time.

The question is whether these dealers should be afforded the same level of service and buying price as bona fide resellers that make a full-time living from IT. Ingram Micro and Synnex have clearly decided they should not be investing resources if a company is going to spend less than $1000 a month or place sporadic and infrequent orders.

The argument is that these buyers should be sourcing product from sub-distribution and paying a couple of extra points for the privilege. If you have any thoughts on this topic, ARN would love to hear them.


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