Saudi share shocker

At least one Saudi Arabian IT reseller had a nasty surprise after visiting its showrooms to collect the weekly takings. Turns out that the entrepreneurial showroom managers had been investing the takings in the stock market during the week, selling the shares off just before the collection happened and pocketing the profits. This may have worked when share prices were soaring, but in the middle of a stock market slump, well that’s a different story…

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By  Stuart Wilson Published  May 10, 2006

At least one Saudi Arabian IT reseller had a nasty surprise after visiting its showrooms to collect the weekly takings. Turns out that the entrepreneurial store managers had been investing the takings in the stock market during the week, selling the shares off just before the collection happened and pocketing the profits. This may have worked when share prices were soaring, but in the middle of a stock market slump, well that’s a different story…

Let’s just say that the wannabe Gordon Gekkos may not have fared too well in a falling stock market and failed to come up with the takings that the company owner was expecting to receive during the weekly collection. Putting this specific case to one side though, the share slump in the Saudi stock market has hit the overall confidence levels in the Kingdom’s channel.

Major retailers have told A-brand vendors that sales were sluggish during April. With a large amount of sell-in occurring in the run up to Gitex there is a significant amount of stock that needs to be cleared out of the channel.

Notebook and core component vendors reckon that the slump in share prices has actually had a knock-on effect to IT sales. Not only has it hit consumer confidence it also meant that many of the buyers that were snapping up notebooks primarily so that they could trade shares online have now decided against taking the purchasing plunge.

Distribution deals

There are a couple of distribution agreements brewing in the Middle East IT channel. Expect to see Emitac — now managed by Wael Fakharany, former Middle East boss at 3Com — beef up its networking portfolio in the coming weeks with the addition of two new vendors.

Elsewhere, Symantec’s distribution shake-up, which saw the vendor drop Tech Data, is still ongoing. Almasa’s value added distribution arm hopes to finalise an agreement to stock a wider portfolio of Symantec products in the near future.

Trend Micro is also closing in on a new distribution deal with a partner focused on the SMB channel in the next week or so, according to regional managing director Justin Doo. Like Symantec, Trend Micro also used to work with Tech Data. The contract, which was up for renewal at the end of 2005, was cancelled by mutual consent.

Staying at Tech Data, Quentin Cornelius, previously sales director at the regional distribution giant, has called it a day and joined software behemoth CA. Elsewhere, SAP's Peter Kwisthout has moved to Sun to take on the role of alliances manager for the region.

Back to the distribution deals and Toshiba has made good on its pledge to appoint a distributor for Iraq and Yemen, naming mobile phone distributor i2 as its preferred choice. The selection of i2 also shows the increasing similarity in the channel strategies required for a wide range of digital devices.

Whether it is mobile phones, PDAs, MP3 players, digital cameras or notebooks, these products require a distributor au fait with the intricacies of handling small high value kit with a relatively short product lifecycle.

All fine at Fortex?

Despite the reassurances from Fortex-MID owner Mehdi Asghari, the regional channel remains somewhat unconvinced that the sub-distribution outfit will be able to resolve its cashflow crisis within the next few weeks and repay its creditors.

Last week’s Channel Middle East Quick Poll asked the Middle East channel community whether they believed that Fortex-MID would solve all of its cashflow problems in the next few weeks. Some 342 members of the channel community voted with almost two-thirds saying that Fortex-MID would not solve all of its problems.

The jury is still out on this one to be perfectly honest. The fact that the distributor that instigated legal action against Fortex-MID had actually visited Asghari in Iran suggests that its representatives on the trip were not totally convinced that the situation could be resolved.

It is easy to see why some creditors are desperate to believe that Fortex-MID can dig itself out of the current situation. After all, it is their credit on the line and nobody wants to admit that it should now be classified as a bad debt unless it is totally necessary.

More worrying than the initial credit problems is the long-term repercussions that credit problems have on the health and the confidence of the regional IT channel. Credit is the lifeblood that drives sales growth and enables the overall market to expand. Credit fears and bad debt impact all companies involved in the channel.

The perception of increased credit risk also scares off new vendors and global distribution giants from increasing their investment in the region. With whispers of powerful regional distributors looking to link up with global players circulating once again in the market, nobody wants to see credit fears associated with the Middle East put the kibosh on potential partnerships.

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