Sun, Solnet affected by contract changes

By RICHARD WOOD

A change in the contract between Sun Microsystems and its sole distributor Solnet is expected to impact the reported revenues of both firms. But the change on paper shouldn't affect growth as both are hopeful recent price reductions and a number of large deals due before the June financial year end will lead to a solid showing.

The changes to the contract shift Solnet from being an "Independent Sales Organisation" to being a "Channel Development Partner/Reseller", and brings Solnet into line with other Sun agencies around the world. In effect Solnet will now supply hardware on a resale basis, rather than on an agency basis.

Sun's reported revenues - $83.1 million for the year ending June 2002 - will be impacted because previously Sun booked the gross buy price on hardware and paid Solnet a commission. Now it will be booking the net buy price, after Solnet has taken its margin.

Privately-held Solnet previously reported revenues inclusive of Sun hardware and maintenance revenues. The Sun Enterprise Service maintenance figures will no longer come under Solnet's reporting.

Sun's New Zealand partner manager Rodney Severn said a sharp cut in pricing last week will lead to higher volume sales and he anticipates an increase in Sun revenues. last year it reported $83.1 million in sales and a loss of $560,847 which was an improvement on 2001's $77.9 million and a loss of $1.1 million. Combined Sun and Solnet revenues to June last year were $95 million.

Severn said Sun is "quite keen" for Solnet to broaden its offerings of complementary products across the board to get a greater market share, and the new agreement will allow for this. He said Sun already has 65 percent of the Unix market in New Zealand.

Solnet managing director Mark Botherway said a broadening of its product range that is planned in the next two months is not related to the agreement. However, he said, there will be a change for Solnet customers in that hardware purchasing will now be in the same contract as other products and services from Solnet, simplifying the ability to do milestone payments.

Severn said that Solnet was not, and is not, an exclusive distributor of Sun, but was effectively exclusive because of the size of the New Zealand market.