Computacenter’s chief executive believes the sale of its distribution arm will free up in excess of £20m in working capital that the company can use to fund its own acquisitions.
Ingram Micro was unveiled as the new owner of CCD this morning, ending the hybrid model Computacenter had operated for many years. As a result, Computacenter will need to buy HP via distribution and could even become a customer of arch rival SCH.
Talking exclusively to MicroScope, Computacenter CEO Mike Norris revealed external analysts had estimated the business would exit the year with more than £70m net cash “and that is a number I feel comfortable with”.
“This will give us a huge war chest,” he said, adding that it would focus “on our core business of providing services and solutions around high-end products”.
The company announced last month it had £55m net cash but added to that is the money paid by Ingram for CCD, and the working capital tied up in stock and reseller debtors.
Signs that CCD would exit trade distribution first emerged last year when it stopped wholesaling PCs and printers. Norris said there were several reasons that shaped its final decision.
“The market is dominated by global players, there was clear dislike from key vendors to the hybrid model and we could get a better return on capital employed from other parts of our business,” he argued.
Channel insiders have questioned if the loss of the distribution arm, which turned over around £100m a year, will make Computacenter’s reselling business less competitive in terms of the rebates it can accrue from vendors at group level.
“We’ve done our calculations and don’t believe we are competitively disadvantaged in the user space by this decision,” Norris responded.
The move does mean Computacenter will need to source HP – 85% of CCD’s turnover – through other distributors, which will undoubtedly present a big opportunity for some to drive greater volumes and increase rebate targets.
In fact the unthinkable could even happen; Computacenter may end up buying kit from ETC, the distribution arm of Midlands-based arch rival SCH Group.
“Potentially, we could become a customer of theirs,” Norris agreed.
The negotiations to buy CCD, exclusively revealed by MicroScope last month, began over the summer and involved Computer 2000 and Ingram Micro.
Norris said it had chosen Ingram because “collectively its offer was better” although he refused to reveal details of the price paid – for this the market will need to wait for the 2009 annual report in March.
He said Ingram’s offices in Maidenhead were nearer to Reading-based CCD so there will less upheaval for staff, and unlike C2000, Ingram did not have HP’s ISS franchise, which meant it could maintain a line-up of five distributors when it shopped for kit.
Around 40 staff will be transferring with the business including general manager Jon Bunyard, who had been offered alternative employment within Computacenter.
“I want to wish all those people every success and a long career and thank them for their hard work over the years,” Norris added.
CCD staff will re-locate to Maidenhead within four months, alongside Ingram’s networking and data capture/point of sales businesses. The CCD brand is likely to be replaced within five months, becoming the Enterprise Computing and Storage division.
“This will be our value-added distribution arm,” Johann Vandenbussche, vice president of the UK and Benelux at Ingram Micro told MicroScope.