Micro-P: Gerry and the pace-setter

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Of all distributors working in the mobile and IT sectors, Micro Peripherals (Micro-P) appears well set to take advantage of the slow but inevitable convergence of sales channels.

It is perceived to be nimbler than other broadliners in the IT market, has a decent profit margin in comparison to them, and runs the kind of well-oiled channel support system its new rivals in mobile are just learning to implement.

It has very good backing too, by a conglomerate whose risk is thinly spread. Its parent, DCC, is listed on the Irish and London stock exchanges with revenue of £5.14 billion, operating profit of €180 million, free cashflow of €304 million and nothing payable until 2014.

It has sundry divisional interests in energy, healthcare, food and waste management, besides its DCC SerCom electronics unit in which Micro-P sits.

DCC SerCom contributes almost a quarter of group revenue and profit, or €1.55 billion and €36.5 million in each case, to the parental coffers, and also incorporates UK computer games reseller Gem, Irish IT distributor Sharptext and French infrastructure supplier Distrilogie.

DCC does not break out the performance of individual trading units, but Micro-P’s consolidated accounts for 2008/9 will show turnover of around £380 million and operating profit of £6.2 million; significantly improved on 2007/8 on both counts. It also has £23 million cash on its books.

“We’re in the invidious position of having very strong backing from our parent, and a very strong cash position, whilst running as a fully-autonomous business at the same time,” says managing director Gerry O’Keefe (pictured).

In the fancy corporate brochure that attended its 2009 accounts, DCC states its reseller businesses will expand this year into complementary markets. For Micro-P in the UK, that means specifically the mobile and fixed telephony markets.

But it is not launching into the mobile channel, now, from a standing start.

It bought smartphone distributor Portix from Expansys for £1.15 million in May last year. It also has a continuing mobile heritage in terms of senior personnel – Anthony Catterson, formerly retail boss at Phones 4U and Carphone Warehouse, was managing director between 2003 and 2005, prior to Mike Alden, whose exit earlier this year opened the way for O’Keefe, another Caudwell Group veteran.

O’Keefe, long-serving finance and operations director at Dextra Solutions, was first courted by Micro-P in 2003, but remained for almost four years until the Caudwell Group was broken up for private equity sale, with Phones 4U going to Providence Equity for £1.5 billion and the 20:20/Dextra business offloaded to Doughty Hanson for £347 million in late 2006.

O’Keefe joined Micro-P as finance director six months later. His promotion in March was part of a DCC progression plan with the retirement of Alden.

And O’Keefe has been quick to bring relevant expertise to Micro-P’s new-channel operations, with Paddy Brennan and Mark Rushton both joining from Dextra in the past couple of months, as, respectively, Portix sales manager and business development manager for the consumer broadband channel.

Meanwhile, in parallel, Micro-P has just recently lost the race for distributor Rocom – its valuation of the business fell short of the £12.45 million telecoms kit supplier Nimans eventually forked out for it in April.

But the move for Rocom demonstrates its ambition to set itself as an acquisitive multi-channel supplier, as well as both its financial muscle and prudence. And Micro-P has taken from the fallout the signatures of Rocom purchasing and operations director Alex Lister and Nimans head of retail Dave Allan (the latter another Dextra old boy) for its new fixed line operation.

O’Keefe suggests, from a reseller perspective, the concept of ‘unified communications’ is more about the convergence of sales channels than  the advancement of technology towards a single cross-platform solution.

“For me it is about the convergence of the channels,” he remarks.

“To grow, IT resellers need to take on mobile and fixed line telephony. That is the angle we are coming at it from because that is our heritage and our primary focus. In terms of mobile broadband [airtime supply] and [the acquisition of] Portix, the motivation has never been just to take business off the mobile distributors; it is about growing the portfolio we offer our IT reseller base.

“Now, an extension of all of this is that it gives us an opportunity to supply IT-related products into those other channels. Because the same thing goes for mobile dealers. Every SME business wants, as much as possible, a one-stop-shop for their mobile tariff plan, their PBX, their networking and their hardware. For any reseller to succeed, they have got to broaden their product set.”

Micro-P was set up in 1980 as a distributor of IT accessories (peripherals). Its expansion into computing – desktops, laptops, servers, networking, storage, print, audio visual – seven years later saw it pitch up alongside IT broadliners Computer 2000, Ingram Micro, Westcoast and Northamber.

The computing market has come under huge pricing pressure in the intervening period. A short history of UK IT kit distribution says a major spur has been the emergence of online resource IT Dealer, set up in 2001 to afford the reseller market full sight of suppliers’ prices and stock holdings.

With it, the balance shifted; at first making  price suddenly the only differentiator for the market. But IT distributors have responded in kind, and their service and logistics have become sophisticated just as their pricing has been forced down and made transparent.

A new breed of online retailer (the likes of Dabs and e-buyer) grew up with these changes, offering the end-market the best range of products at the best prices, shifting huge volumes without ever holding stock itself.

In terms of route-one fulfilment, their distributor suppliers are slick operations, able to pick, pack and ship next day to the varied consumer market. And their stock holdings are significant. Typically, big IT broadliners can range 60,000 skews and major on 500. The biggest handset distributors run 500 lines, perhaps, and do most of their business on a half-dozen devices.

Full article in Mobile News issue 444 (July 27, 2009).

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