2 min read

Distributors not willing to take the Eurotrip

Tech Data and Bell Micro take some financial hits in Europe as both distributors restructure their divisions overseas

While many distributors experienced revenue growth or expanded their operations over the past year, not all the news was good.

Both Tech Data and Bell Micro, for example, took hits in Europe. Ingram Micro, on the other hand, grew its European business by one per cent last year, so despite a soft Euro, it managed to remain stable – perhaps due to its massive restructuring and outsourcing initiatives last year.

While Tech Data said its Americas region performed well, its European operations affected overall earnings expected for the first quarter of last year. It blamed its poor performance in Europe on the “weaker macro-economic environment and slowing IT demand in many countries.”

After its disappointing first-quarter results, the distributor announced its Europe, Middle East and Africa (EMEA) restructuring program, which is expected to save $55 million to $65 million a year – and hoped to boost operating performance in the region.

Tech Data is also undergoing major changes to its executive management team by splitting the roles of chairman of the board and chief executive officer. Steven Raymund will remain as chairman and CEO until a new CEO has been appointed, at which point he will continue as chairman of the board.

Bell Micro also experienced a shortfall in sales and profits in its European operations. In the third quarter of last year, for example, its European sales fell 13 per cent year-over-year, compared with a 17 per cent increase in revenues for North America and 28 per cent increase for Latin America. The distributor said it was not pleased with its European performance in the third quarter, including its Ideal Hardware division in the U.K.

Like Tech Data, it’s undergoing a restructuring effort in Europe, which includes ridding the company of low-margin products and concentrating on higher-margin, value-added products. In November it signed an agreement to acquire rival MCE, a European distributor of storage products based in Munich, Germany, to improve business in some of its weaker areas.

What does this mean for the distribution business and will it affect Canada?

Many industry analysts say the distribution business is continuing to grow, thanks to foreign and SMB markets. Ingram Micro, for example, saw little growth in Western markets last year, but its Asian sales grew 27 per cent, while its South American sales grew 25 per cent.

But not everyone sees Europe as a declining market. In fact, some niche distributors have actually expanded their business there through acquisitions.

RFID Scans
Last April, ScanSource acquired Europdata Connect, a U.K.-based distributor of RFID, wireless and automotive-identification technologies. In October, Arrow Electronics acquired DNSint.com, a Germany-based distributor of computer products in 14 European countries and one of the region’s largest suppliers of Sun Microsystems products. Arrow said this acquisition is the basis for accelerated growth in European markets.

Clearly, all is not lost in Europe. But it’s not Asia or Latin America, either. In a market already saturated with technology, focusing on bleeding-edge, niche or differentiated product offerings will be key – just as it is here in Canada.