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A welcome distraction

A welcome distraction

Self praise is no praise but it is difficult not to cry 'we told you so' after hearing that Cellnet is to acquire HiTech Distribution (see page 1 of ARN edition December 20, 2006). When the Queensland distributor's boss, Adam Davenport, first announced his intention to go shopping back in August, we drew up a shortlist of potential targets. "From a geographical perspective, Cellnet could do worse than spend some of its dollars buying one of the leading players in SA, WA or both. There are a handful of attractive options but one that absolutely leaps from the page - HiTech Distribution. (ARN, August 9, page 2) Having already snapped up VME Systems back in October, which was the local master distributor for SanDisk, Cellnet is starting to deliver on its acquisition promises. More activity can be expected in the New Year, with Davenport predicting action in Melbourne. However, the possibility of a deal with leading target, Dicker Data, looks all but dead.

The HiTech acquisition must be a welcome distraction for the Cellnet management team. There had been encouraging improvement in its share price during recent months but that was quickly eroded by poor first half projections communicated at its AGM last month. Having risen from $1.20 in June, it reached $1.68 a few weeks ago but had dropped back to $1.35 at the time of press. Improving the share price is priority number one as a listed company and Cellnet has to arrest the slide.

Looking back over the past 12 months, consolidation among local distributors has been a little slower than expected. But technology wholesale is still a very tough business and further fallout should be expected in the New Year.

Most of the action in 2006 was concentrated in the reseller ranks, with leading integrators in seemingly constant discussion with each other. Although size isn't everything, and some smaller operators have established very successful niche plays, increased scale remains an effective way for companies to maintain growth rates.

Another trend we can expect to see continue in 2007 is an increased focus on SMB from traditional enterprise vendors. EMC has made significant strides through its partnership with LAN Systems. Nortel has now announced a range of SMB products through the same distributor, while CA has dramatically cut its number of direct accounts and will launch a channel program early next year.

With enterprise spending expected to remain fairly stagnant for the foreseeable future, these moves are no surprise. While it is easy to announce SMB plans, it is much more difficult to make them work. These vendors will come up against well entrenched competitors such as D-Link and Netgear in the case of Nortel, or Symantec and Trend Micro for CA, and wrestling market share away won't be easy.

From a technology point of view there are likely to be few surprises, with major players continuing to refine messages around key pillars like mobility and security. But whatever next year brings, we look forward to keeping you up to date with the news that matters.

Brian Corrigan is editorial director of ARN. Reach him at brian_corrigan@idg.com.au


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