Synnex Expects Big Things From Android Tablets

Synnex beat third-quarter estimates for sales and earnings thanks to continued demand and an increased focus on more-profitable products and services, the company said Wednesday. Following the announcement, President and CEO Kevin Murai spoke with Everything Channel's Scott Campbell about the distributor's results and what to expect heading into 2011. Here are excerpts from the conversation:

On the analysts' call you mentioned that Hewlett-Packard accounted for 37 percent of your total sales. Traditionally, HP has been the biggest vendor through broad-line distribution, but I seem to recall numbers between 25 percent and 35 percent. Is 37 percent too high a mix to rely on one vendor?

We have historically had a larger percentage with HP. We haven't been in that range you mentioned. We've always been in the mid- to higher 30s for the last several quarters anyway. It's a great partnership. We are the number one-shared distributor with HP. We're the only distributor that sells their entire IT portfolio, from calculators to netbooks and notebooks up to enterprise-level servers and storage. Quite honestly, one of our strategies is to figure out who the winners are and who our strongest partners are going to be.

After your second-quarter earnings release, you cited product shortages as impacting your financial results. Was that still the case in the third quarter?

Now it's become a rounding error. The errors that we saw have remedied themselves.

You reported a 9 percent sales increase in the third quarter, that's the lowest year-over-year percentage increase since the fourth quarter last year. Is it a case of the year-over-year results getting past the trough or has the growth we've seen slow down?

I don't think we have anything to apologize for. When you wade through the discussion from a financial standpoint [Synnex's sales were impacted by a $95 million difference because of a change in reporting for certain revenues going forward], we still grew our business into the teens [13-14 percent growth]. Over the last 18-20 months, we've had significantly stronger growth than our competitors. We're happy with our performance. We're still growing faster than the market.

You mentioned that you see great opportunity in Android-based tablets. What are you guys selling now, or where do you expect to see that growth?

We've on-boarded a couple of new vendors on the New Age side of the business and we have a couple of others that we probably can't talk about yet because we're in the middle of discussions. But also with our existing vendors, many of them are planning or have announced Android-based tablets. With the focus that we have, the core of commercial IT and a strong presence in consumer/retail, it positions us to take advantage of what is a huge market growth opportunity.

Next: Where Android Fits In Do you see any vertical markets, such as health care, where Android-tablets will be particularly big?

Initially, the significant volume is going to be on the consumer side. But on the commercial side, we look at tablets in all verticals and solutions, whether it be health care or something else.

Your National Partner Conference is next week. What message will you have for VARs at that show?

There's a couple of important things to mention. We anticipate record attendance. Between partners, vendors and our [staff], we will have well over 1,000 people there. It puts a smile on our faces and reflects the strong partnerships we have. One of the the interesting changes we have this year is we have been transitioning to a solutions focus, some verticals like health care and independent retail and platforms like digital signage, managed services. We're taking a real solutions focus on the showroom floor. We're going to be highlighting 20 business solutions, where you have multiple vendors in booths. It allows resellers to go in and walk through the entire solution.

There are a number of sessions and seminars that are solutions focused. And we extended it to a second day because some of them tend to get more complex. With multi-vendor sessions, there are more people that need to talk to a solution. One good example is network management. We have Barracuda, Enterasys, Buffalo [Technology] and Watchguard.

Your Global Business Services business increased 22 percent year-over-year. Can you explain what makes up that segment of the business?

It's what we call our [business process outsourcing] BPO business. There's a lot of platform-based BPO, traditional call-center and tech support is a sweet spot for us and customer cycle and lifecycle programs. We have a number of clients that are IT vendors, but we also have quite a diverse portfolio, large companies who have found that is more cost effective to them to outsource certain activities to us.