Not often KitGuru discusses channel affairs. Most of our readers are fun loving types who love nothing better than loading up a virtual plasma rifle and blowing their best friends into a million tiny globs of goo. That said, we’re hearing a lot of channel chit-chat about Bell Micro and wondering what it means.
First up, here’s the 101. Companies are businesses. To have a business, you need to make a profit. Making a profit means that you sell product to a customer for more than it costs you to buy, keep and ship.
With us so far?
When a channel expert says to you that a company is working Back-2-Back, they don’t want you to imagine a couple of scared warriors with swords – being faced by overwhelming odds.
In this context, Back-2-Back means that product is being bought in at a price and then sold on at exactly the same price.
Buying a loaf of bread for £1 and selling it for £1 does not a business make. With all the other costs associated with doing business, companies that trade Back-2-Back long enough will experience severe stresses that profitable companies simply never face.
Over the past few weeks, there have been a lot of stories about channel competitors becoming more and more aggressive to win business. Normally, you would expect this from smaller, local players who are trying to make some kind of impact. Not in this case.
Bell Micro was bought earlier this year by giant distributor, Avnet. The Avnet shareholders were kind enough to bend over and pick up more than $350M in debt that Bell Micro’s management had managed to accumulate by trading in a less than profitable fashion.
The backing of global giant Avnet, and the enormous buying power that brings with it, should have allowed the Bell Micro division to firm up business and beat a path to winning ways.
On Bell Micro’s web site, for this kind of business administration, they seem to point the finger at a man called Graeme Watt. The online blurb says that he’s responsible for the “strategic direction and profitable growth”. So if it isn’t growing or profitable, I guess we can expect Graeme to stand up and be counted. He was, after all, the man directing things when Bell Micro had its insurance cover pulled in 2008. He also steered the ship when Bell Micro was delisted from Nasdaq.
For most companies, if they are doing the whole growth and profit and sunshine routine, then there’s normally some recruitment going on. But not on Graeme’s watch. At least not at the time of looking. But maybe we were looking in the wrong place.
We’ve never met Graeme. For all we know, he’s a business guru who’s simply been faced with challenges that would have been too difficult for anyone to navigate. Every time a company recruits Graeme into a new role, they seem to be after his ‘vision’. And they seem to keep on hiring him.
Back at the grass roots level, if the rumours we’re hearing from the market are correct, Bell Micro’s sales team are working hard to make new Back-2-Back deals, in an attempt to find revenue.
It could be as simple as ‘they are behind and just need to hit quarterly targets’. It could be that they want to clear tons of unwanted inventory. Or it could be something else, something darker. Only time will tell.
KitGuru says: Everyone concerned hoped that Avnet’s earlier intervention would have turned Bell Micro around and we still hope it will. But if a major company seems to be trading as fast as it possibly can – without a solid profit in the deal – then what kind of message does that send to the market?
Micro chat below or ring the warning bell in the KitGuru Forum.