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UPDATE: Siltek plunges into turmoil

UPDATE: Siltek plunges into turmoil

Toshiba's gone, so are HP retail products, but Seagate's decided to remain loyal. However it all tastes a little bittersweet.

As the fallout from Siltek's radical staff overhaul continues, retail-focussed vendors have re-evaluated their relationship with the distributor.

As reported by ARN this morning, Toshiba and Siltek have parted ways and Toshiba this afternoon issued a press statement to make it official.

The statement suggested an amicable parting with both parties stating the partnership of over five years had been successful. "We're sorry to see the end of this relationship but understand Siltek's desire to focus core business activities in areas other than retail, which is an important business focus for Toshiba," said Phil Cameron, national sales manager at Toshiba's Information Systems Division. Siltek Asia Pacific CEO Bruce Harvey told ARN there was "no animosity with Toshiba".

Meanwhile, Harvey has confirmed it will no longer distribute HP retail products, such as its Pavilion PCs, low-end inkjet printers and scanners. HP Pavilions have been one of Siltek's big movers since Prion days.

"As part of our negotiations going forward that would be a product we can't have access to," Harvey said. "It's a no-brainer."

Greg Trigger, HP's channel and alliance manager, also confirmed the loss of HP Pavilions from Siltek's business. He said HP's consumer distribution strategy remained "very solid" and would not change any further as the remaining distributors, including Tech Pacific, would pick up Siltek's sales.

Harvey said while Toshiba and HP are gone, the distributor's corporate-focussed vendors will remain. The list includes Iomega, IBM, Sony, Adaptec, Minolta QMS, Hitachi, Kyocera, Acer, Xircom and Enterasys Networks.

"None of those other vendors have products nominated to only be sold through retail outlets," he said. "We have no intention of terminating the relationship with any other vendors."

Importantly, Seagate has remained loyal. Seagate's Australian country manager, Dale Townsend, told ARN today: "At this stage there is no reason for [the retrenchments] to affect our relationship with Seagate."

Townsend said there are no immediate plans to dump Siltek despite the exit of former CEO Hugh Evans, who has driven the relationship since Agate began 10 years ago. "I've got the greatest deal of respect for Hugh Evans," Townsend said. "I wish him the very best."

He concluded by saying his reason for staying with Siltek was in part because "one man doesn't run the company".

Bittersweet

For all the polite talk, Toshiba and HP retail's exit reflect Siltek's new tough stance on both retailers and vendors in an increasingly competitive market.

Harvey claims industry talk of an IT market downturn of around 25 per cent is in reality closer to 40 per cent, particularly in the wintel arena. "A lot of people are putting on a brave face and I can tell you it's exactly that, a brave face."

As a result, Harvey lashed out at vendors who expect too much from distributors for little margin. "The margin expectations of what they think a distributor should have [to live on] is naive," he said. "It's a cash flow negative business."

As for retailers, Siltek is not rejecting any retail business, it just has to be by Siltek's new rule book which vetoes any 1 or 2 per cent margin sales to resellers.

"If Harvey Norman want to do business with us that's fine, but it's on our terms," Harvey said. (Harvey Norman handles its vendor relationships directly).

Meanwhile, Harvey would not reveal the one-off charge Siltek will wear to fund the 50 redundancies.


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