CDW buys its way into IT services market

For computer reseller CDW Corp., 2005 was a record-setting year in a variety of fiscal categories, including sales ($6.29 billion) and net income ($272.1 million). But apparently 10% year-over-year revenue growth and 13% income growth weren’t enough for the Vernon Hills, IL-based company. To expand its service offerings, CDW in September announced the acquisition of $390 million Berbee Information Networks Corp., a provider of IT solutions, for approximately $175 million in cash. The deal was expected to close by the end of October.

“We think there’s going to be a huge opportunity here,” CDW chairman/CEO John Edwardson said during a Sept. 18 conference call, “and we expect it to be a $1 billion business for CDW…CDW’s objective is to double Berbee’s revenue in the next five years on an organic basis alone.”

Berbee relies on a field sales force working out of 11 branch offices throughout the Midwest. Founded in 1993, the company provides IT products and services, including network infrastructure, storage, and security, primarily across the Cisco, IBM, and Microsoft platforms. Berbee’s top three executives, including CEO Paul S. Shain, have agreed to remain with and lead the business. Berbee will operate as a separate strategic business unit of CDW with its current operations, locations, and staff of approximately 800 employees.

Edwardson said that about two-thirds of Berbee’s customers are not current CDW customers and that the companies’ complementary offerings will create significant cross-selling opportunities. “Berbee is one of the nation’s biggest independent IT solutions providers,” he said. “Our vision is to become the world’s biggest and best direct technology provider. In this competitive industry, customers increasingly want to leverage IT to enhance their business performance. They want easy access to core technology and more advanced solutions.”

A key initiative for CDW this year, Edwardson continued, is to “organize and grow our services business to increasingly meet this customer demand for a single-source solution.”

Jim Clancy, managing director for New York-based investment bank Goldsmith Agio Helms, says the initiative is a wise one, as is CDW’s acquisition of Berbee. “CDW is trying to move away from somewhat of a commodity distribution, and yet they have tens of thousands of customers,” Clancy notes. “CDW will stick with their customers and look for more IT solutions, beyond products, and more services.”

Clancy also expects CDW to expand its services business beyond the Midwest. “I wouldn’t be surprised if they look for other smaller, regional, high-quality IT solutions providers and grow the business in other parts of the country,” he speculates. “This really makes a lot of sense as far as an avenue to grow. From Berbee’s standpoint, [CDW is] a great parent with a national and international footprint that can get behind it.”

Partner Content

Hincapie Sportswear Finds Omnichannel Success in the Cloud - Netsuite
For more and more companies, a cloud-based unified data solution is the way to make this happen. Custom cycling apparel maker Hincapie Sportswear has leveraged this capability to gain greater visibility into revenue streams, turning opportunities into sales more quickly while gaining overall operating efficiency. Download this ecommerce special report from Multichannel Merchant to more.
The Gift of Wow: Preparing your store for the holiday season - Netsuite
Being prepared for the holiday rush used to mean stocking shelves and making sure your associates were ready for the long hours. But the digital revolution has changed everything, most importantly, customer expectations. Retailers with a physical store presence should be asking themselves—what am I doing to wow the customer?
3 Critical Components to Achieving the Perfect Order - NetSuite
Explore the 3 critical components to delivering the perfect order.
Streamlining Unified Commerce Complexity - NetSuite
Explore how consolidating multiple systems through a cloud-based commerce platform provides a seamless experience for both you, and your customer.