Seneca Data Acquires CSI

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Terms of the agreement between North Syracuse, N.Y.-based Seneca and Alpharetta, Ga.-based CSI weren't disclosed. However, the deal would create a $116 million custom-systems powerhouse with annual shipments of 81,126 systems, well behind No.1 system builder Equus Computer Systems, Minneapolis, which shipped 173,500 units in 2005.

The combined Seneca-CSI would have 3,500 active VAR customers and a robust ISV customer base. The deal also would open the door for Seneca to double its manufacturing capacity

"This puts us in a very dominant position on the East Coast, making us the second-largest system builder in the country and giving us economy of scale to continue to grow the company and service our customers," said Seneca Data Senior Vice President Greg Masingill.

CSI will operate as a division of Seneca Data, according to Masingill. He said the CSI brand won't go away, but Seneca will continue to sell its Nexlink branded systems and the CSI branded systems.

"This will substantially change the system builder landscape," Masingill said. "We are going to be able to bring more technical resources under one umbrella, hopefully increasing our ability to bring out more products with two strong brands: Nexlink and CSI." He added that the deal would create a sales force with what he called some of the "best tenure and experience in the system builder community."

The genesis of the deal was well over a year ago in a meeting between senior executives from Seneca and CSI founder and President Brett Berto, Masingill said. The acquisition wasn't the result of financial shortcomings at CSI but rather a chance to form a bigger system builder company, he noted.

So far, there has been no discussion of layoffs, but a decision would be made on possible cutbacks in 60 days, Masingill said. Berto was unavailable for comment.

Masingill said he's optimistic about the opportunity ahead for Seneca since some of the tier-one PC makers are "struggling to determine where they play in the marketplace."

"There is a huge opportunity in the broad market and with the ISV market that requires a lot of hand holding and one-on-one management," he said. "There will be some consolidation in the market, but for the people that stay committed to their customer base and serve those customers with the best technology and product offerings, they will be in the industry for a long time," he added.

Glen Coffield, president and CEO of Cheap Guys Computers, an Orlando, Fla.-based system builder, said he expects more consolidation in the system builder channel among larger regional players, while smaller "mom and pop" system builders will concentrate on their core markets. With the regional players there is a significant opportunity to gain economy of scale and slash redundant costs, he noted.

"When regional players come together, they become stronger as a whole than they were individually," Coffield said. "The problem is there is always someone bigger coming around the corner."

It's tougher than ever been before to be successful in the system builder business, Coffield added. "You have to be much more creative, and you have to negotiate harder," he said, noting that he is buying more products directly from manufacturers rather than from distributors.