By: Paul Fruitman
Supercom has sold its American arm to Fremont, Calif.-based Synnex Information Technologies Inc., claiming a tough American market made it more worthwhile for the Markham Ont.-based distributor to concentrate all its resources on Canada.
“We were not doing very well in the States,” said Supercom president Frank Luk. “We were not efficient and it (wasn’t) profitable. So I guess we should focus on Canada.”
“Synnex believes they can turn (the American division) into a profitable (operation). Synnex is in expansion mode, so we just matched.”
In early July, Synnex, a privately-held distributor, purchased Merisel Canada for US$30 million in cash.
Luk said financial terms of the deal will not be released. Supercom has 80 employees in the U.S., most of whom will go over to Synnex.
A spokesperson at Synnex declined to comment on any impending purchases.
Supercom’s Canadian management took over their American counterpart last May. The two companies were separate operations before the restructuring.
Before taking control of Supercom USA, Supercom Canada had revenues of $500 million and at the time of the restructuring, Luk said consolidating operations would enable Supercom to reach the $1 billion mark.
But a little over a year later, Luk’s vision turned out to be wishful thinking.
While Supercom had $600 million in revenues in Canada last year, the company’s American division pulled in only about US$100 million.
“I thought we could turn a profit (in the U.S.), but after a year, we didn’t see a green light,” Luk said. “The market was really competitive in the U.S.”
Luk also suggested the resources Supercom devoted to the U.S. market were not enough to make the company competitive south of the border.
“Our top management was not in the States; sometimes we lost focus,” Luk said, adding Supercom failed to make timely pricing adjustments south of the border.
Supercom is not the only Canadian distributor to manage operations south of the border. Jim Estill, president of EMJ Data Systems Ltd. in Guelph, Ont., has maintained an office in Raleigh, N.C. for years.
“It makes sense if a company has a non-profitable business unit for them to get rid of that business unit and provide more focus,” Estill said of Supercom. “But it doesn’t necessarily follow as a generalization to say that just because a company has operations in the States that they’re not going to make money.”
With the addition of Supercom USA’s operations, Synnex has continued on its acquisition plan and the distributor has expansion plans for Canada.
When Synnex bought Merisel Canada, the fear north of the 49th parallel heightened for Merisel’s channel as concerns arose the new ownership would turn the modus operandi upside down, resulting in job cuts and an overhauled strategy.
But Synnex moved quickly to try to allay those fears.
“It will remain as is, status quo,” Sandra Salah, director of marketing for Synnex, said of Merisel Canada. “They’ve built a very fine organization, and we don’t want to disrupt that,” she said in a prior interview.
With no official statement put forth by Synnex prior to the sale being approved, it is not known what the company’s plans are for Supercom’s USA division and its staff.
Founded in 1989, Supercom Canada has sales offices in Toronto, Montreal and Vancouver, with authorized service centers in Toronto and Vancouver. Supercom’s U.S. operations consisted of five regional sales and manufacturing offices in New Jersey, Dallas, Salt Lake City, Atlanta and Portland. The Markham offices served as the company’s North American headquarters. Servicing a customer base of over 16,000 computer resellers across Canada and the U.S., Supercom has been acknowledged as one of the top distributors in Canada via several awards including back-to-back Resellers’ Choice Awards for best distributor.
The organization employs about 500 people throughout its manufacturing warehouses and sales offices.