News

SED Sees Gold in OEM Distributor Status

• By Scott Bekker
• 03/01/2007

SED International Inc., a distributor of computer systems, consumer electronics and wireless devices, in January announced a jump in status among Microsoft's exclusive group of U.S. distributors. The Tucker, Ga.-based company signed an agreement with Microsoft to become an Authorized U.S. Microsoft OEM Distributor effective Jan. 1 of this year. SED had previously been an Associate U.S. Microsoft OEM Distributor.

While the 350-employee SED has some big customers, including e-tailers, the core of the business consists of providing personalized service to small system builders and resellers around the United States, says Rob Kalman, SED's vice president for marketing.

"Even as we become a master distributor, we'll continue to focus on small customers as our primary goal," Kalman says. "That can mean anything from a single person working out of their home or a small system builder or IT guy that started out his own business, up to a decent-sized business doing a million dollars a year in sales. We have a lot of small mom-and-pop-type customers. We still have a lot of people starting up their own businesses every month coming to us to open accounts."

Founded in 1980, the company has its strongest presence in the southeastern United States, with additional sales offices and distribution centers in Dallas, Miami and a new one in Tampa, Fla. The company also has offices in City of Industry, Calif.; Buenos Aires, Argentina; and Bogota, Columbia.

In a statement accompanying SED's announcement of its status, John Ball, Microsoft general manager for U.S. System Builder, confirmed that SED's customized support and programs bring an important element to the mix of Microsoft distributors.

Microsoft elected to promote SED even as it shut down the Microsoft associate distributor program, which consisted only of SED and Wintec Industries as of last year. SED now joins other U.S. Microsoft OEM Distributors, such as ASI Computer, Avnet, D&H Distributing Co., Ingram Micro, Ma Labs, Synnex Corp. and Tech Data Corp.

In the low-margin business of IT distribution, the Microsoft decision to grant the improved status is key.

According to SED's 10-K filing with the U.S. Securities & Exchange Commission from mid-2006, the company noted: "SED operates under formal but cancelable distribution agreements with certain of its suppliers. If these agreements were cancelled, SED would be forced to obtain its products through wholesalers. This would reduce SED's profit margin on the affected products."

Of SED's 6,500 regular IT customers, Kalman estimates that well over half are Microsoft partners. The new status as a full-fledged Microsoft distributor will make the company more attractive to Gold Certified Partners.

Over the past few years, Kalman notes, certain incentives and rebates for Gold Certified Partners would only be available if the partners purchased software from authorized distributors -- not from associate distributors like SED.

"Most recently, [Microsoft] had changed that, but [it] kind of went back and forth," Kalman says of Microsoft. "Now, we know, and our customers know, that [Microsoft] will get all benefits."

Kalman says SED expects its business to grow as a result of picking up more Microsoft Gold Certified Partner business because of the new status. But he adds, "Our main focus will continue to be on the breadth, and the number of smaller customers."