Intel distances itself from channel credit crisis

Intel has distanced itself from the credit crisis facing its Middle East authorised distributors, claiming that it ‘does not get involved in credit terms between distributors and resellers’.

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By  Stuart Wilson Published  June 7, 2006

Intel has distanced itself from the credit crisis facing its Middle East authorised distributors, claiming that it ‘does not get involved in credit terms between distributors and resellers’. The financial collapse of several large Dubai-based resellers has left a number of Intel authorised distributors including Empa, Logicom, Mindware and Tech Data with exposure to bad debts. “Intel does not get involved in credit terms between distributors and resellers,” stated Dania El-Kadi, Intel’s marketing manager for the GCC. “Any credit that we provide is to distributors as per the agreements we have between us and our authorised distributors.” The resellers that have exited the market leaving behind outstanding debts include MID-Fortex, MST and Micron — all close partners of Intel and active participants in the vendor’s various rebate and incentive schemes. Asked whether Intel was concerned that the companies that defaulted on payments to its authorised distributors were all close partners of Intel, El-Kadi commented: “The health and prosperity of our channel are very important to us. Intel works with a broad base of channel partners in the Middle East and we try to stay as close to the market as we can, taking our channel’s input into consideration as we continuously develop new initiatives and programmes that support them.” Distributors and resellers in the market have expressed concerns that a delay in rebate payments from Intel may have been a contributing factor to the current situation, forcing some resellers to flee the market leaving behind bad debts. El-Kadi would neither confirm nor deny that this delay had occurred. “Our programmes are designed to provide efficient support to our channel members,” she commented. “Yet we cannot get into the details of our business practices or of specific cases.” While Intel’s Middle East operation continues to distance itself from the credit problems hitting its authorised distribution partners, the channel has been quick to highlight flaws in the vendor’s policies that in some cases allowed sub-distributors to sell Intel product at a lower price point than authorised distributors. In correspondence seen by Channel Middle East, one discontented channel partner e-mailed a number of senior executives at Intel in both Europe and the US, highlighting issues concerning the Middle East go-to-market strategy. The sender, who did not reveal his identity, sent the e-mail to seven senior Intel executives including Sophia Chew, VP sales and marketing group and general manager reseller channel operations, and Maurits Tichelman, director of sales and distribution reseller channel operations EMEA. The e-mail read: “It seems that you still do not give enough importance to the severe situation that Intel has created in the Middle East region. Another two of the major so called ‘system integrators’ are gone with new tens of million of dollars lost and with a fast crashing IT channel market, and a growing list of comapnies [sic] nearing bankruptcy. Intel is loosing [sic] face, image and credibility fast as all these are well known Intel CPU movers.” “If anyone at Intel has any real concern for this situation, you might want to start investigating your people in the region starting with the people who approved and decided the integration ratios for the so called ‘system integrators’, creatting [sic] false, fragile and unfair market that was destined to crash,” the e-mail continued. “These ‘integrators’ discount their prices way below the distributors because of the marketing rebates and e-caps and any other price advantages they manage to cut with the local Intel people. With this price advantage they can outsell the authorised distributors and they can also sell easily to other regions and they continuously do. This also resulted in shrinking the distributors channel to very few ‘integrators’ who are doing over 80% of the business. More importantly, these integrators end up with huge credit from distributors and when one cannot manage his cash flow or/and sales cycle they break and bankrupt creating a huge mess to the Intel brand and to the market players,” the e-mail claimed. Some authorised Intel distributors contend that Intel’s channel policies did contribute to the current problem, but refuse to place the majority of the blame at the vendor’s door, highlighting instead that it was up to every individual distributor to decide on the correct and safe amount of credit to extend to each of its customers.

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