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CompuCom bids for GE IT Solutions unit

Desktop integrator proposes merger with network specialist in hopes of gaining synergiesrn



A large U.S. systems integrator will gain a significant foothold in the Canadian market through the acquisition of General Electric’s IT Solutions unit.

If the deal is approved by regulators, Platinum Equity, which owns Dallas-based CompuCom, will take over Mississauga, Ont.-based GE ITS by

the end of the year.

Platinum, which is headquartered in Los Angeles, bought CompuCom in October. Financial terms of the GE ITS deal were not disclosed.

Organizational changes have not been announced, but it’s most likely the combined entity will be managed by Jim Dixon, who Platinum appointed president of CompuCom a few weeks ago.

CompuCom boasts many Fortune 1000 clients, including General Motors, Boeing, Delta, Zurich North America and Bristol-Myers.

About 1,600 of its approximately 4,400 clients are categorized as large enterprise, representing industries such as banking, aerospace, oil and gas, state and municipal governments.

Federal supplier

GE ITS is a supplier for the the Canadian National Master Standing Offer, which provides the firm important relationships as a reseller and integrator with the public sector.

GE has about 300 staff in Mississauga, and employs 1,700 around North America. CompuCom employs about 3,500.

Platinum Equity spokes-man Mark Barnhill said the company had been looking for dozens of potential partners following its takeover of CompuCom. He said there would be a number of synergies with GE ITS.

“”Compucom is much more desktop-focused from a product standpoint, and even a service standpoint,”” he said. “”GE tends to be more on the network side and the server side.

“”We think the consolidation of those businesses really provides customers with an end-to-end integrated IT solutions provider that we think will be good for customers of both.””

CompuCom and GE ITS are merging at a time when market analyst firm Forrester Research is forecasting only moderate growth in the IT sector.

In projections released last month, Forrester analyst Andrew Bartels predicted IT spending in the U.S. will rise seven per cent next year, but only four per cent here. That doesn’t necessarily mean the reseller market will get smaller, he added.

“”I don’t see anything in the environment that would suggest we’ll see consolidation accelerate,”” he said. “”There’s enough growth going on that existing suppliers will remain stable.””

Barnhill said Platinum isn’t worried about the long-term outlook for IT sales in North America.

“”It may not be recovering as quickly as some had predicted or hoped, but it is moving in the right direction,”” he said.

‘Well managed’

“”We believe these are two terrific companies that have demonstrated an ability to succeed whatever the market conditions. I mean, in 17 years of its existence, CompuCom has been profitable every single year. GE is a very well-managed and profitable enterprise as well.””

At one point, GE was busy executing its own acquisition strategy, buying up several smaller firms including Brunswick Micro Systems in Eastern Canada, Aardvark Consulting in Western Canada and Ottawa-based Opcom Solutions in the late 1990s.

In 2000 it sold off its configuration assets to Ingram Micro, negotiating an outsourcing arrangement letting the distributor taking over most of the product-oriented side of GE ITS’s business.

‘Corporate carve-outs’

This included product procurement services of hardware, software and personal computer products; logistics and order management.

The idea was that Ingram’s help would leave the large reseller free to devote more resources to technical services and consulting.

Barnhill said Platinum, which has acquired approximately 50 firms over its 10-year existence, has experience in what he called “”corporate carve-outs”” — taking over a division of a larger corporate parent and establishing it as a standalone entity.

“”We think that experience will allow us to transition both CompuCom and GE and to integrate those businesses that minimize any disruption to customers.””