Managers invest in IT distributor

By PETER GRIFFIN

The management of the country's biggest IT distributor, Tech Pacific, is buying into the firm following its $229 million global acquisition by investor CVC.

From its distribution centre in Albany, Tech Pacific ships PCs, software and IT equipment to retailers, resellers and consumers around the country.

It notched up revenue of $417 million last year, up from $357 million in 2001.

Managing director Tony Butler has yet to release his bottom-line profit for 2002, but said it had grown by a greater percentage than turnover. Net profit in 2001 was $7 million.

CVC last week snapped up 58.5 per cent of Tech Pacific, which, with distribution operations in Australia, Hong Kong, Singapore, Malaysia, Thailand and India, is a major player throughout Asia-Pacific. Sales last year totalled $3.2 billion.

Previous owner Hagemeyer retains 31.5 per cent and Tech Pacific's senior management, including Butler and his management team, bought the last 10 per cent.

"The senior management teams all came back with requests for far more shares than were able to be issued," said Butler.

Although Tech Pacific's revenue dwarfs that of rivals Renaissance and Ingram Micro, the distribution business has faced consolidation in the past 18 months. Increased freight costs and the strong New Zealand dollar have squeezed margins.

Quoting statistics from IT industry researcher IDC, Butler said the average price of a PC was around $2600, down from a peak of $4200 in 2001. "We have to sell 50 per cent more PCs today to have exactly the same dollar turnover," he said.

Tech Pacific's growth was largely "organic" - less than $5 million came from new product lines.

The bundling of flat-panel displays with PCs and strong growth in laptop sales was partly countering slumping PC prices.

LCD monitors are easier on the eye, take up less space on desks and use less power, while laptops are now cheap enough to be within reach of small businesses and home users.

Tech Pacific is slowly building revenue from wireless networking products, which are set to become more popular as the telcos establish their wireless broadband services.

"It's a very small part of the business at the moment but its year-on-year growth percentages are huge," said Butler.

Although distributors' business models are under pressure, Butler said the growing popularity of online buying showed the importance of distributors.

"Anyone who has tried to buy a book from Amazon.com will discover that they may pay more for freight than they do for the book."