Cellnet rationalises IT operations

Cellnet rationalises IT operations

ASX-listed distributor sells off its IBM business to Avnet as part of IT exit strategy

Cellnet is terminating its remaining IT relationships and will wind up the division this month. The news comes after the ASX-listed distributor sold its IBM business to Avnet last week.

Samsung printers channel manager, Greg Wallis, confirmed its printer relationship with Cellnet would end July 1. He said the distributor had been a strategic distribution partner but its departure wouldn’t have a material impact on its business. Cellnet also has distribution agreements with Samsung’s telco division, but Wallis was unable to comment on its future.

“We will work with Cellnet to clear inventory in an assistance role,” he said. “Them exiting [the market] is how the industry goes when it’s consolidating. So our relationship will end.”

There were no plans to find a replacement distributor, Wallis said. Samsung’s printer distribution channel is broken into B2B and consumer streams and includes Ingram Micro, Alloys, Altech, and Dynamic Supplies.

Lexmark channel and SMB manager, Stephen Bell, also confirmed the printing vendor would not be working with Cellnet going forward. It will now evaluate whether it needs to find a replacement supplier to take up where Cellnet left off.

"We didn't proactively seek this and believe it came from their end," he said. "We were happy with the relationship as it was but wish them all the best in the future."

Asus CEO, Ted Chen, said the vendor was still working out where its business relationship with Cellnet sat. He did not expect the arrangement to continue but rather pointed to leveraging its existing relationships with other partners, including Avnet.

“If you talk about mainstream products we have a broad product line-up. Last year, when Cellnet made some decisions, we had already migrated a lot of products to existing partners and some new partners,” he said. “This time because it is only the server business I don’t see any major change for us; it is very minor.”

The fate of Cellnet’s IT business hit the spotlight last month after the company revealed plans to sell the division. Last week, it announced a deal to offload its IBM operations to rival distributor, Avnet. While financial details have not been disclosed, Cellnet managing director, Stuart Smith, said the sale was expected to release $2 million in working capital over the next two months and have little impact on earnings.

Cellnet’s IT division is manned by 23 staff, 15 of whom were devoted to IBM. Avnet is now negotiating with those employees, and has confirmed it will take nine on.

“The staff moving over, in the current economic environment, we saw that as a positive. The customer base in terms of continuity is all hopefully going to be fairly seamless,” Smith said. A decision on how to use the funds raised from the sale of the IT operations had yet to be made.

Avnet director of marketing and business innovation, Michael Costigan, said the purchase would allow it to expand and consolidate its presence in Queensland.

“It will give further emphasis to Avnet/IBM business here in Australia,” he said. “We are looking at what inventory Cellnet currently has on its books and are in the process of evaluating that inventory, how well it is and whether we have a need for it with our existing supplies and existing partners.”

General manager for UPS vendor Eaton Power Quality, Michael Mallia, expressed surprise at the developments and said it had been undergoing joint training with Cellnet in recent weeks.

“To be honest, I am not exactly sure where we stand as to whether the Avnet guys will take our business across,” he said. “We haven’t had a chance to talk to them but we have already had calls from Avnet people to sell UPS anyway. But it is all up in the air right now.

“From what was happening prior to the sell-off, we were gearing up to do the training and quite a lot more business. There seemed to be future growth on the horizon so I don’t expect too much to change.”

NetComm is one of Cellnet’s telco and retail vendor partners. Its general manager, Danny Morrison, said the networking vendor continued to view the distributor as an important partner.

“As far as we’re concerned, it’s business as usual – there’s no change for us,” he said. “It [the IT sell-off] could move more focus on the channels we partner with Cellnet in.”

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