It seems not every market is ripe for distribution. Tech Data has just withdrawn from its Middle East operations, blaming “increasingly difficult” market conditions. And regional distributor Aptec will be taking over where Tech Data, one of the region’s best-known names in the business, left off.
Rumours have been flying around for the past couple of years that Ingram Micro would buy Tech Data Middle East, but it’s hard to imagine why. The division posted a net loss of US$142 million for its financial year ended Jan. 31.
Ingram would have faced the same problems as Tech Data, which struggled to establish strong operations outside of the UAE, particularly in Saudi Arabia. And the region wasn’t exactly bringing in huge volumes. Besides, Ingram is trying to start up a joint venture business in Africa, so it already has its hands full.
Aptec Holdings was also a subject of these rumours, but one that made more sense. It distributes IT and telecommunications products in the Middle East and Africa, with regional coverage in UAE, Saudi Arabia, Egypt, Lebanon, Turkey and Kuwait.
And this rumour did, in fact, come true.
Aptec just announced the formation of a new business unit, called Track Distribution Middle East (TDME), which will take on Tech Data’s enterprise and components business in the region. Tech Data Middle East will hand over up to 14 franchises and distribution agreements to Aptec, saying in a statement that the majority of its 120 staff had been offered jobs at the new business unit.
Hanspeter Eiselt, managing director of Tech Data Middle East, said in the statement that in the past Tech Data had enjoyed considerable success in the Middle East. “But changes to market conditions have made it increasingly difficult for Tech Data to operate profitably in the region,” he said. “The decision to exit this market has been made in the best long-term interests of the company and its shareholders.”
Aptec, however, sees “tremendous” opportunities for growing the business across the Middle East. It will continue to operate from the current Tech Data office location in Dubai, and Tech Data Europe and Aptec plan to form a strategic alliance that will allow TDME to take advantage of Tech Data’s central supply organization in Europe.
Speculation about Tech Data’s commitment to the Middle East had been building for weeks. Earlier this month, Tech Data Middle East axed its relationship with vendor partner Hewlett-Packard, sending out shock waves in the industry. It cited discord with HP’s compensation model as the reason for cutting off ties with its most important vendor partner in the region – which brought in US$90 million of its annual sales, according to Channel Middle East. It also cancelled a local contract with Acer.
What works in one region clearly doesn’t always work in another. And in this case, the rumours were – at least in part – true.
Comment: [email protected]
