What shape will Jim Estill leave Synnex in?

While we’ve heard a slew of disheartening revenue reports over the past six months, Synnex has some good news. The distie reported revenues of US$1.73 billion for the first quarter of this year, compared to US$1.75 billion a year ago. That’s only a difference of about one per cent. Not bad. And net income climbed to 59 cents (per diluted share) – beating Wall Street estimates of 52 cents.

Synnex attributes these gains to increased market share and effective cost management. But it’s also due to an increase in its Global Business Services revenues, which saw a dramatic jump of 30 per cent compared to the same period a year ago. That’s the kind of number we’ve gotten used to seeing with a minus sign in front of it.

But it points to an important trend: the services business is hot. And, too, the distribution business is evolving, yet again. The fact that Dell is now partnering with Ingram Micro and Tech Data is a clear sign that times have changed.

Of course, Canada isn’t being hit as hard as the U.S. and we have more access to credit here, thanks to our stronger banking system and third-party inventory finance companies – but we’re all affected to some degree.

And vendors are taking a hit. But that doesn’t mean it’s written in the stars that solution providers will suffer as a result. Vendors, like Dell, are being forced to adapt their business models to current economic conditions. In Dell’s case, that means delving into two-tier distribution. For others, it may mean more of a focus on cloud computing and offering their wares as a service.

Some businesses will actually do well over the next year – those that are flexible enough to adapt their business model to changing conditions. Services – such as consulting and remote management of applications – seem to be weathering this economic storm. VARs that don’t adapt may disappear, and we’ll likely see more acquisitions in the coming year.

Synnex is predicting a revenue decline in the next quarter, but it’s not nearly as significant as the predictions of its competitors. It has forecast a revenue decline of between eight and 13 per cent for the next quarter, while Ingram Micro and Tech Data are forecasting dramatic 20 per cent declines.

So, it’s not business as usual anymore. But if Synnex was able to grow its Global Business Services by 30 per cent in the midst of an economic downturn, there are clearly still opportunities out there – for those who are flexible enough to reach for them.

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Jim Love, Chief Content Officer, IT World Canada

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Vawn Himmelsbach
Vawn Himmelsbach
Is a Toronto-based journalist and regular contributor to IT World Canada's publications.

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