CDW Slashes IPO Price

IT solution provider and reseller CDW on Wednesday unveiled a major cut in its initial public offering price as part of its proposed public listing on the Nasdaq exchange under the ticker symbol "CDW."

CDW, in a Wednesday SEC filing, said it plans to sell 23,250,000 shares of common stock at an estimated IPO price of between $17.00 and $18.00 per share.

Before expenses, that would raise a total of between $395,250,000 and $418,500,000. Assuming a per-share price of $17.50, CDW estimated its total proceeds, after deducting underwriting discounts and commissions and estimated offering expenses, would be about $379.2 million.

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However, this is a steep cut from the company's earlier prospectus, unveiled in a June 14 SEC filing, which said the company expected a per-share price of $20.00 to $23.00.

This is not CDW's first time to go public.

CDW was founded in 1984 by Michael Krasny as Computer Discount Warehouse and first became a public company in 1993. CDW in 2007 went private in a $7.4 billion deal when it was acquired by equity companies Madison Dearborn Partners and Providence Equity Partners.

In its most recent S-1 filing, CDW estimated that sales of Hewlett-Packard products accounted for about 21 percent of the company's revenue, followed by sales of Cisco products, which accounted for 13 percent. About 31 percent of its purchases come from its three primary distribution partners: Ingram Micro, Tech Data and Synnex.

HP, along with Dell and IBM, is among the manufacturers CDW also includes in a list of competitors. The company also said its competitors in the channel side include both volume resellers and value-added solution providers including Dimension Data, ePlus, Insight Enterprises, PC Connection, PCM, Presidio, Softchoice, World Wide Technology and others.

While CDW lists HP and solution providers as competitors, it does not really compete well when solution providers focus on providing value, said Dave Butler, president of Enterprise Computing Solutions, a Mission Viejo, Calif.-based solution provider and HP partner.

CDW focuses mainly on volume sales, while companies like ECS focuses on value, project-based sales, Butler said.

"If one of my reps came in and said CDW was getting a deal from us, and could we come in with a lower price, I'd tell him that that's a CDW deal," he said.

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As for competing with HP, Enterprise Computing's Butler said that may happen with the kind of products HP might sell online such as PCs.

"But I don't see HP intentionally taking business from partners," he said. "There are some situations where HP may take a deal direct, but it's not in their DNA. If I'm in a deal and HP takes it direct, HP allows the reseller to become the agent of record and provides it compensation."

It appears to be a good time for CDW to return to the public stage.

Despite its status as a private company, CDW in December reported full-year 2012 sales of $10.1 billion, up 5.5 percent over sales in 2011, with gross profit up 5.4 percent to $1.67 billion and net income of $119.0 million.

CDW revenue in 2006, the last full year before it went private, was reported as $6.8 billion, with income reported for that year of $266 million.

The success of a new CDW IPO could help serve as a guide to Dell, which is moving to go private via a leveraged buyout in a move to reorganize itself to be less of a PC-centric company away from Wall Street scrutiny.

Once CDW completes its IPO, it will be in good company. Seagate and other tech companies have gone private and then public in the last few years after reorganizing their businesses.

CDW did not respond to requests for more information by publication time.

PUBLISHED JUNE 26, 2013