Synnex CEO Talks Networking Growth, Windows 8 Expectations

Synnex posted its 100th profitable quarter Monday, thanks to strong SMB sales.

Following the fiscal second-quarter earnings call, CRN spoke with Synnex President and CEO Kevin Murai about the IT distributor's profitability streak and some of the new vendors that Synnex has recently added, most notably Huawei. Murai also discussed his views on Ultrabooks and ultra-thin PCs, as well as his expectations for Windows 8. Here are excerpts from that conversation.

Synnex recorded its 100th consecutive profitable quarter. Talk about what that means, especially in the competitive IT distribution business.

First, let's make sure credit is paid where credit is due. Out of the last 25 years, I've only been here for four of them. Going all the back to our founder Bob Huang, and the culture he instilled, the focus has always been on how to make money, and that starts with being the best at what do and making sure our customers come first. With that in mind, through good times and tough times, we've never lost sight of that objective.

[Related: SMB Drives Synnex Q2 As Profits Rise, Sales Fall ]

Now that all sounds like motherhood and apple pie, of course, but you'd be amazed at how important that is, at least in my experience. I think some businesses lose their way as time goes on and as they get really big. So, not losing sight of the fundamentals to me is very important. In addition to that, I think the vision that Bob and others have had has really been focused more around the technology industry and how do we embrace change in the industry and create business models around that change that provide us an opportunity to add value and get paid for it. Ultimately, regardless of whether you're looking at new business opportunities on the distribution side like our CloudSolv platform or our services business, it's about never sitting still, never being comfortable in the position that we have and always aiming to do better. I think those are some of the core reasons we've been as profitable as we've been for 25 years.

You pointed out during the Q2 earnings call that the SMB market was strong for Synnex. What were some of the specific areas that drove growth for you last quarter?

The SMB market is, of course, as broad as the overall market, so the patterns we saw there matched the patterns we saw in the overall industry. So let me give you an example. Even though the overall printer market has been relatively soft over the past several quarters, in the SMB market, one of the areas that we're doing well in is in management platforms. It's still part of that printer category, but it's really a different way of managing print devices and actual printing and the consumables that go along with it in a much more value-add kind of way. So that's where we are able to contribute a platform to help our customers to create incremental business in a market that is otherwise soft. Other areas of strength such as storage have followed what we expected in terms of the overall industry.

Are you seeing much interest in Ultrabooks?

There's tons of interest around the Ultrabook. Right now it's a bit too early to tell because it's only been very recently that some of these products have actually been launched. And, there are still a lot of products that have been announced but haven't yet launched. But because of the size and form factor of the Ultrabook and ultra-thin notebooks in general, we expect that they're going to generate a lot of interest both on the consumer side of the business and the commercial side of the business.

NEXT: Huawei, Windows 8, And More

For Windows 8, are you expecting the same kind of interest level and refresh business as previous versions of Windows?

I think it remains to be seen. I think you're going, perhaps, to see more of a difference in how this version rolls out between consumer and commercial markets than we've seen in the past. So, keep in mind that the commercial market has typically taken a wait-and-see approach; when Service Pack 1 is released, that's generally when the commercial market starts to really pick up on the refresh. So, that likely will still happen.

But right now whenever people think of Windows 8, they think of the GUI and the Metro interface. And in my mind, that's much more of a consumer play than a commercial play. So, I think the excitement for Windows 8 is going to be around the Metro interface; however, I also believe that in order to take advantage of that experience, you have got to be operating in a touchscreen environment. So, you can go one of two ways with that. If you don't have a touchscreen notebook, then maybe you're not going to upgrade to Windows 8. However, the other view you can take is, if you don't have a touchscreen notebook, then you're going to upgrade both your operating system and your notebook.

You added some notable vendors to your line card recently, with Huawei being at the top of the list. What's the strategy going forward? Are you adding new vendors at the same rate you did maybe five years ago?

I don't necessarily look at the rate at which we add new vendors. There are really two important things for our view on adding vendors. Number one is that part of our core business strategy is that we have a more focused approach to our line card. We're not going to go out and brag about the thousands of vendors that we list; we're actually happy listing a few hundred and being very close to them and having the vendors that are best-of-breed in the category that they operate in.

That being said, when I do look at our net new business from a vendor perspective, I look at it more from a sales standpoint than the number of vendors. And, it's hard to say if we're at the same velocity as we were before. Typically, you don't understand that until you're a few months into that relationship. But, I will say we're happy with the progress we've made, and one area in particular. We recognized that one of the gaps we've historically had on our line card was networking and communications. And in the past couple of years, not only have we grown to be the largest market share partner for HP ProCurve, but we've also enhanced the overall networking communications line card quite a bit. In addition to Huawei, we've partnered with Arista and Aruba, just to name a couple others.

In terms of new networking vendors, Huawei is going to have the biggest effect on the business, correct?

Yes, right now. But, also look at what Synnex brings to the table in networking and communications offerings -- from Wi-Fi and edge to the core networking and the data center. With the addition of Huawei and the others I mentioned, and with HP ProCurve providing the historical base, we pretty much cover the entire spectrum for networking and communications. So, I think we have a very robust networking line card today.

PUBLISHED JUNE 26, 2012