Tech Data CEO: Buying Avnet TS Will Create Broadest Set Of Offerings Of Any Distributor

Tech Data CEO Bob Dutkowsky said his company's proposed $2.6 billion purchase of Avnet's Technology Solutions business will create the most complete line card of any distributor in the fast-growing data center space.

"When we put [Avnet] TS and Tech Data together, we will be the most complete, end-to-end distributor in the industry," Dutkowsky told CRN. "Everyone else has to take inventory and compare against the breadth of offerings that Tech Data is going to have in the marketplace."

Solution providers are turning more often to distributors to pull together multiple technology components and create holistic business solutions as the site of residence for a computing application becomes increasingly irrelevant, Dutkowsky told investors Monday morning.

[Related: Distribution Bombshell: Tech Data To Buy Avnet's Technology Solutions Business for $2.6B]

Marrying Avnet's data center expertise with Tech Data's broadline capabilities will allow the combined company to capitalize on the convergence of enterprise and consumer-focused technology as well as the blurring of lines between offerings delivered on-premise versus offerings delivered in the cloud, Dutkowsky said.

"The resellers over time won't want to make multiple phone calls to multiple distributors to find those piece parts to build a solution," Dutkowsky said. "They'll want to have access to everything from the desktop all the way through to the cloud."

Both Phoenix-based Avnet and Tech Data, Clearwater, Fla., have robust data center practices, with Avnet's data center-focused TS business delivering $9.5 billion in annual sales while Tech Data derives $8 billion of business each year from the data center, Dutkowsky said.

"We understand the vendors that play there," Dutkowsky said. "We understand the growth opportunities."

Nonetheless, the acquisition represents the first time Tech Data partners will have access to suppliers such as Juniper Networks, F5 Networks, Nutanix and Nimble. In addition, the distributor's Americas practices tend to focus on different customer types, Dutkowsky told CRN, with Avnet serving large enterprise partners in the region and Tech Data primarily servicing small and midsize solution providers.

"We knew the data center business," Dutkowsky said. "But the industry now is moving much faster, and our board became convinced that we needed to jump-start our growth in those areas."

Tech Data approached Avnet about coming together roughly a year ago, Dutkowsky said, with talks gaining momentum in the early summer timeframe. The deal took a long time to unfold, Dutkowsky said, since Avnet's leadership needed time to think about the proposal before coming on board.

"As we learned more about it, we became even more enthused," Dutkowsky said.

Avnet's TS business struggled in its 2016 fiscal year, which ended July 2, with sales falling 8.8 percent from $10.58 billion last year to $9.65 billion this year. But Dutkowsky said becoming part of Tech Data will allow TS to evolve from servicing channel partners around the narrow data center space to having a broader relationship with them across the entire value chain.

"If you're sitting on the [Avnet] TS side, it would be difficult for them to figure out how to get end to end without a transaction like this," Dutkowsky said. "We get very excited about the potential that we see to help jump-start that business and drive that business to a higher level."

Dutkowsky said competing against Avnet's TS business every single day allows Tech Data to see its strengths and weaknesses in a slightly different light than the investment community.

"There is a very real, very robust value business there," Dutkowsky said.

Avnet and Tech Data also plan to partner around the Internet of Things, Dutkowsky said. Avnet has IoT capabilities around both its TS business as well as its Electronics Marketing (EM) business – which is not being sold to Tech Data – while Tech Data formally launched an IoT practice in July. The companies haven't yet spent a lot of time hammering out the details of this partnership, Dutkowsky said.