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Carapelli Computers exits local channel

One of Dubai’s Khalid Bin Al Walid Street longest serving reseller shuts down allegedly owing Dubai Computer Group members AED4m ($1.1m)

Carapelli Computers exits local channel
Carapelli Computers' showroom on Khalid Bin Al Walid Street has been closed for business for over three weeks.

Carapelli Computers, one of Dubai's longest serving high street IT resellers that operated out of Bur Dubai has exited the local channel after allegedly failing to meet its debt obligations, which are estimated to be around AED22m ($5.9m) Channel Middle East has been informed.

A visit by the Channel Middle East team to Carapelli Computers' showroom on Khalid Bin Al Walid Street opposite the Royal Ascot Hotel, found the shop closed.

Efforts to contact the owner of Carapelli Computers were unsuccessful as telephone calls to the store were not answered.

A salesperson who works in an IT store next to the Carapelli Computers showroom who spoke to the magazine on condition of anonymity confirmed that the outlet has been closed for business for over three weeks, but declined to give any further details.

Carapelli's demise after more than 20 years of reselling top tier one IT brands comes at a time when most high street resellers have been struggling with continued declines in PC sales and other IT hardware. Resellers are not the only ones who have found business to be challenging as technology service providers are also experiencing hard times in the region as IT spending in general has been reduced.

In the GCC market, the decline in PC sales has been compounded by the drop in oil prices, IT projects being shelved and civil wars in Yemen, Syria, Iraq and Libya, which has dented the regional IT trade and dampened business confidence.

A source familiar with the latest closure has told Channel Middle East that the owner of Carapelli Computers fled to India some three weeks ago, when it became clear that the company couldn't meet its debt obligations.

Shailendra Rughwani, president at Dubai Computer Group (DCG), confirmed Carapelli Computers' exit from the local market and said information that the association has received, indicates that some DCG members have been affected by the latest run away case. "In fact, the DCG is monitoring another three companies that have approached us to help them negotiate with our members they are indebted to," he said.

Rughwani said the DCG was informed that Carapelli may have over borrowed and when the local financial institutions withdrew their credit facilities, the company was in a difficult position to pay back the loans. "About eight to 10 DCG members have been impacted although the larger share of the monies owed is to local financial institutions," he said. "Banks in the UAE have been stringent on SME financing, not just in IT but in other sectors and this started some time back. In some cases, some local banks have closed their SME business divisions."

Rughwani said the market has been tough especially in the second quarter this year. "Carapelli Computers' demise will no doubt bring apprehension, suspicion and uncertainty in the local market," he said. "We remain hopeful and resolute that things will improve in the third and fourth quarter, and we are already seeing some improvement in sales."

The DCG is urging its members to secure credit insurance or in some cases do business on a cash basis.

He said part of the problem with reseller runaways has to do with how business is conducted locally. "The market is a credit-driven market and it is a challenge to change this mindset and adopt other business models," he noted. "That said, it is important for resellers to get credit cover for any business they conduct on credit as that protects them from such incidents."

Dharmendra Sawlani of Smile Computers and general secretary at DCG, agreed and confirmed Carapelli Computers had exited the market, although it wasn't a DCG member. "The company had business dealings with DCG affiliates," Sawlani said.

Hesham Tantawi, vice president at Asbis Middle East, Turkey and Africa (META) and an advisory panel member at DCG, said while the latest reseller exit is sad for the local channel, it shows a much bigger problem that resellers are faced with in the market.

Tantawi said the latest runaway has not affected IT distributors, but has impacted reseller businesses and banks. "I have long campaigned against the practise of resellers selling products to each other instead of developing new sales at end user level," he said.

He said there is need for greater cooperation between channel stakeholders, industry bodies and relevant government authorities to find a lasting solution to this problem. "The tendency of reselling products at under cut prices must be stopped. Every time that happens, it should be a warning in the market about potential trouble brewing," Tantawi said. "Credit terms extended to resellers need to be constantly reviewed regardless of whether a company has been in the market for a long time or has good reputation."

Sawlani added that the affected DCG members are owed around AED4m and the outstanding is for local banks and other financial institutions. "What's sad about this exit is not just the money, but effect it has in the market in terms of the negative sentiments it creates for the whole IT channel," he remarked.

He said last week the DCG had a meeting with officials at the Dubai Department of Economic Department through the ‘Business Community Engagement Programme', where a lot of issues where discussed including the negative impact reseller runaways are having on the whole Dubai IT trade.

"We requested the authorities through the Economic Department to engage banks and credit insurers to act more responsibly and not create more hardships for smaller resellers that need access to credit facilities," he said. "We will be meeting with the CEO at the Dubai Department of Economic Development to put our proposals to them on how they can help DCG members and the entire IT market on how best to come up with lasting solutions."

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