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Press RoomRead this story at the ChannelWeb site here: http://crn.channelsupersearch.com/news/var/32300.aspDecember 27, 2001 Stories of the Year: The ChannelBy T.C. Doyle and Rich Cirillo Amid the flagging economy, a relative handful of solution provider companies soared. Most, however, retreated, cutting staff and regrouping. Here's a quick look at the top stories impacting VARBusiness 500 companies and beyond.
Each time Big Blue announced quarterly earnings in 2001, the company's Global Services division ended up taking center stage. That's because, for the most part, the company's financial performance has been driven by the division. While other companies have been struggling to find new business, the services unit has been scoring multi-year, multimillion dollar outsourcing deals with customers, including Dow Chemical and other household names. By the third quarter of last year, the company had announced that its services backlog reached as high as $97 billion. Makes you realize why Lou Gerstner is a lot less interested than Compaq's Michael Capellas or HP's Carly Fiorina to follow Michael Dell into a PC price war.
The collapse of now defunct marchFIRST answered once and for all whether Web integrators who doggedly pursued strategy, technology integration and branding could make it in a market dominated by older and more established IT consultancies and reseller shops. Since the Chicago company succumbed to market pressure in the spring, other once high-flyers have fallen to earth in a humble way. Razorfish recently retreated from Europe, for example. IXL and Scient clung to one another like cheap life preservers, while once-hot Luminant is now seeing its assets sold to competitor Lante at bargain-basement prices. Others have also retreated or withdrawn completely from what was but two years ago one of the more promising market segments.
The fall from grace of Exodus, once one of the bright stars of the xSP market, likewise marked a turning point in Web services. Hosting may still be a viable business, but not for upstart start-ups with no longstanding ties to customers or technology vendors.
At any given moment, there are literally tens of millions of dollars worth of goods for sale on eBay. Some of the gear listed for sale there is gray market equipment whose origins are unknown, while other stuff is merely all that remains from failed dot coms. Regardless, the arrival of this equipment on eBay has radically transformed product reselling. Now at a glance, end users have insights as to exact prices of equipment, both new and old. EBay has become so important in product distribution that several of the world's top distributors and vendors alike have begun hosting their own auctions. It's not clear where all this activity is heading, but it is abundantly clear that it's not going anywhere for long unless eBay is along for the ride.
In a year that saw the number of IPOs slow to a crawl, many ambitious companies went ahead and completed their deals. KPMG Consulting distinguished itself as the first former Big Five entity to spin itself out as a public company, with a successful offering in February. Only months later, Accenture raised the bar, bringing in some $1.67 billion in its own IPO. Both stocks have since held up well, hovering in the $20 to $25 range, proof positive that a sound balance sheet, a seasoned executive management team and an innovative business strategy will attract a crowd no matter what the market conditions.
Since Sun parted company with megadistributor Ingram Micro, many wondered how Sun would expand its once vibrant channel. It defied convention when it picked mail order maven CDW as its newest channel buddy. The deal gave the direct response company the rights to resell Cobalt and other low-end Sun goods. But that, of course, made traditional Sun partners worry. How much more of the Sun business would it eventually get? Sun officials say not much more, but Unix partners remain unconvinced.
In nearly every corridor of the IT solution provider community, bankruptcies have mounted. The reason? Over-expansion and under-capitalization. In the Sun market alone, three of distributor MOCA's top reseller customers filed for bankruptcy: Gobosh, Stonebridge Technologies and Aztec Technology Partners. And what about Breakaway Solutions, Comdisco, Zefer and FutureLink? The list goes on and on.
One of the few high-tech mergers this year, the deal combines two VARBusiness 500 giants, Nos. 140 and 146, respectively. It also marked one of the few billion-dollar plus deals to have been completed this year.
In just one month this fall, channel business advisor Ken Wasmer says he received five calls from Orange County, Calif., solution providers seeking help with selling their businesses. Unfortunately, he told them, many other reseller principals from coast to coast are looking to do the same. Because so many are looking to sell their businesses, prices for even successful solution provider organizations have dropped to the floor, making this year the mother of all buyer's markets. Don't expect any multiple at this time, warns Wasmer. You'll be lucky to get out with whatever equity is in the business today.
When HP announced in July that it planned to purchase the disaster recovery assets of struggling solution provider Comdisco, it looked like Carly Fiorina and her team were gaining a strong business opportunity, especially in light of the tragic events of Sept. 11 which put disaster recovery on every company's front burner. Then came Sungard, the industry's second-largest disaster recovery firm, which outbid HP and won the deal. While the transaction was held up for several weeks as the U.S. Department of Justice argued that merging the second- and third-largest disaster recovery providers would violate antitrust laws, a decision by the U.S. Court of Appeals finally gave the OK in November, marking a victory for Sungard and yet another failed acquisition bid by HP.
Read this story at the ChannelWeb site here:
http://crn.channelsupersearch.com/news/var/32300.asp
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