Computacenter Plc has reinforced its position as the largest conduit between PC manufacturers and large European accounts with the acquisition of Germany’s largest computer reseller GE CompuNet for a potential 121m euros ($120m).
Consolidation has ripped through the PC channel-to-market during the last five years as the narrowing margins on selling product makes it increasingly difficult for many resellers to survive. Computacenter acquired the UK and French reseller operations of GE Capital IT Solutions (GECITS) in October 2001 for 2m pounds ($3m).
As part of that deal, Hatfield, UK-based Computacenter sold its struggling German business to GECITS for $260,000, and this operation will now return to the Computacenter fold.
Computacenter now dwarfs its closest European rival, Birmingham, UK-based Specialist Computer Holdings, which made sales in the year to March 2002 of 2.5bn euros ($2.5bn). If the revenue of GE CompuNet is added, Computacenter made full-year 2001 sales in excess of 4bn euros ($4bn), and it now claims to be the largest corporate account reseller in the UK, Germany and France.
Mike Norris, chief executive of Computacenter said that GE CompuNet is the German equivalent of his company. The target operation made an operating profit of 17.2m euros ($17m) in the year to December 2001, compared to a loss of 35.2m euros ($35m) in the year-ago period. Revenue fell 8.5% to 1.24bn euros ($1.23bn), which was largely due to slowing product sales.
Kerpen-based GE CompuNet has a workforce of 4,250 in Germany and Austria, where its client base includes companies in the manufacturing, retail and financial services sectors. Computacenter will pay an initial 57m euros ($57m) plus a potential earn-out of 64m euros ($64m) depending on the company reaching certain financial targets in the next two years. Computacenter will use its existing cash resources to fund the deal.
With the cost of computers in decline, resellers such as Computacenter and its main European peers Getronics NV and WM-data AB have been forced to focus on building up their higher-margin services business, adding offerings such as desktop and network management, consulting and systems integration. Computacenter said that GE CompuNet makes a quarter of its sales from services including security, voice/data integration and directory services. It also has a close relationship with network products vendor Cisco Systems Inc.
The deal also means that General Electric has effectively wound down its interests in IT services in Europe, apart from two small standalone operations in Spain and Portugal, which ComputerWire understands may also be up for sale. Newport, Kentucky-based GE Capital IT Solutions business made estimated revenue in excess of $3bn in full-year 2001, and claims to be the third largest computer reseller in the US.