IBM and Distributor Synnex Cut Ties in U.S. Market

Big Blue cites "mutual" agreement to end relationship; Ingram Micro moves to grab partners.

IBM Corp. has ended its long-term relationship with Synnex Corp. in the U.S., deauthorizing the distributor from selling its software less than one year after it removed approval to sell its xSeries products.

The move becomes effective on Oct. 1 and follows a similar development last October when IBM withdrew permission from Synnex to sell the vendor’s System x line.

The distributor retains authorization to sell IBM equipment in Canada and Asia Pacific. Synnex officials could not be reached for comment.

The decision affects about 65 IBM software resellers. Channel partners said that the vendor notified them in an email that the two companies would be parting ways.

An IBM spokesperson called the decision to terminate the working relationship a “mutual” agreement and pointed out that the change concerned fewer than 15 percent of the vendor’s U.S. software resellers.

“We continue to work together in other parts of the world,” the spokesperson said. “This change in our business relationship affects a very small number of resellers in the U.S.--less than 65 resellers compared to the more than 500 we typically work with in the U.S. around our software.”

The IBM spokesperson said that the vendor is calling each of the involved channel partners directly and giving them 90 days to catch on with one of its remaining distributors—Arrow Electronics, Avnet, Ingram Micro and Tech Data. IBM also will help resellers with the transition.

Finding a source for IBM software may not be a problem for solution providers already working with another distributor but those lacking a ready-made alternative might have some work ahead of them to get relocated.

Ingram Micro in pursuit

“It’s bound to cause some discomfort or at least some scrambling in the short term,” said Charles King, principal analyst at Pund-IT in Hayward, Calif. “Any time a reseller has to find a new distributor it creates some confusion but it might also present some better options.”

An Ingram executive confirmed that the distributor is pursuing the unattached IBM software solution providers.

“Ingram Micro is actively out there in the field working to earn the business of those solution providers who were buying IBM software from Synnex,” said Scott Zahl, Ingram vice president, vendor management. “We have a good working relationship with IBM on both sides of the business and are here to help these partners make the transition and continue growing their business.”

Zahl said that Ingram Micro makes a strong case to win the business of the IBM software solution providers.

“Outside of a proven expertise in transacting the core business, Ingram Micro offers these partners access to a variety of training and education both on the technology itself, as well business acumen, sales and marketing best practices,” he said. “The peer-to-peer partnership opportunities and vendor relationships that Ingram Micro brings to the table really go unrivaled and deliver great value to our partners.”

While IBM’s decision last October to remove its xSeries products from Synnex’s shelves appeared to shock the distributor and its partners, to channel insiders this latest development may not have been as surprising or unexpected.

“IBM stated a move toward controlled distribution for software earlier this year, so to consolidate distributors at the same time isn’t a surprise,” said Cyndi Privett, research vice president at Viewpoint Research Inc. in Scotts Valley, Calif.

“In October, IBM software partners have to align with one distributor for their software purchases,” Privett said. “Since Synnex no longer carries the full hardware portfolio, it stands to reason that it would be the first to go in a consolidated line-up.”

Its turmoil with IBM notwithstanding, Synnex exceeded Wall Street estimates for its recently concluded second fiscal quarter, posting net income of $19.2 million, a 4 percent increase from the same quarter last year. Revenue declined slightly for the quarter to $1.81 billion, a 4 percent dip from the $1.88 billion recorded in a similar period the prior year. Analysts had predicted revenue of $1.68 billion for the quarter.

Company officials cited growth areas as unified communications, managed print services and healthcare, while pointing to storage, servers and components as declining market segments.

TAGS: services,IBM,marketing,Synnex,Ingram

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