In a surprise move, Ingram Micro has acquired the storage business of value-added distributor Simms International for an undisclosed sum.
The acquisition launches Ingram into the storage fray with all seven of Simms' staff heading to Ingram's offices in the Sydney suburb of Silverwater. The new business unit will be headed up by Andrew Hill, Simms' storage solutions manager, and be known as Ingram Micro Storage Solutions.
Simms is also taking over its existing vendor partners, including Compaq, Hitachi Data Systems, Veritas and Storagetek, providing Ingram with an impressive portfolio of storage products.
Hill told ARN the acquisition is designed to leverage Ingram's broad-based distribution model, additional marketing funds and established small-to-medium enterprise customer base.
"It gives us the chance to leverage synergies with other products. So instead of a reseller coming to us in the past for storage and having to go to someone else for a server, Ingram becomes a one-stop shop.
It also establishes a presence for Simms' former storage business in other states, which Hill claims will rapidly grow the company's revenues.
In the lead up to today's announcement, Ingram has been positioning itself to move into storage with the recent appointment of Leona Reed as manager of the distributor's storage division. The deal took little over two months to crack, but follows early indications of a potential partnering agreement between the two distributors.
Hill's first task is to integrate the two businesses into a single entity, which could see a number of Ingram's business development managers and sales personnel trained up to cross-sell storage products.
Conversely Simms International will retain its core memory business and growing media business, including its role as master distributor for Kingston Technology. According to Simms managing director Andy Hilton, the memory business accounted for 60 per cent of the distributor's revenues.
Simms' storage business is now reportedly generating $12-15 million per annum, with the company currently holding around $250,000-worth of stock.
Hilton refuted suggestions that the sale of Simms' storage business was potentially unwise given the plummeting price of memory.
"I can see why [people] would say that. But if you look at the memory business, prices are falling but people are buying more of it," Hilton told ARN. "Memory is a consistent business for us, whereas storage tends to go in peaks and troughs."
The acquisition also gives Simms a significant war chest, but Hilton is keeping Simms' intentions for the cash injection under wraps pending the outcome of a "number" of deals slated for the next few months.
Meanwhile, Ingram is touting the move as a major milestone.
"We were interested in Simms because they had the right combination of vendor relationships and high-quality, skilled staff," Ingram Micro managing director Steve Rust said. "We have been looking around the market since we identified storage as an area we wanted to grow into."
Likewise Rust was reluctant to disclose the cost of Ingram's latest acquisition. "We paid a price that is fair, given the quality of the acquisition. We are looking at investing further in the business, both in terms of staff and resources, to take advantage of a growing market in the storage sector," he told ARN.
The acquisition is expected to be complete by September 1, 2001.