Are reseller bankruptcies increasing in Canada?

Just how bad is it for resellers out there?

Pretty bad for a lot, according to an Ingram Micro Canada channel official. Earlier this month at the distributor’s annual reseller’s sales conference, Greg Tobin, the senior director of VAR sales told attendees that “”of late we’ve had the highest

percentage of VAR bankruptcies”” in Canada.

Without mentioning names, he said there have been six major bankruptcies this year, as well as four major consolidations. Two of the latter were Bell Canada’s acquisitions of Charon Systems and Infostream Technologies.

In an interview Tobin said there’s a company going under or merging every day.

CDN was unable to verify that statement, although last month a Montreal newspaper said an Apple chain closed several of its stores. A Montreal receiver told CDN that a networking company has made a proposal to creditors to keep itself from going under.

Spokesman for these companies could not be reached to verify their financial situation.

But executives of other major national distributors don’t see things as too bad.

“”Our bad debt experience is 50 per cent [down] for the same period a year ago,”” said Tech Data Canada president Rick Reid, “”and in parallel with that our DSO – day’s sales outstanding – which is a very important metric when talking about receivables, is improved dramatically over last year as well.””

“”The amount of money written off in the first half of the year related to VAR bankruptcies is 80 per cent lower than the same period last year,”” he added.

Jim Estill, CEO of Synnex Canada, said he hasn’t seen an increase in resellers closing in the past six months.

“”I’m not sure there’s anything new or the numbers are any greater than it’s ever been,”” he said in a telephone interview this week from Shanghai, where he’s attending a vendor conference.

“”I have a budget on what we expect on bad debt, and we’re in line with that.””

Dave Walsh, Ingram Canada’s vice-president of marketing, said the bankruptcies he knows about are not a sign of major trouble in the industry. Financial experts agree that businesses go under during recoveries, not recessions, because they don’t have money to expand when business starts to improve, he said.

While several firms have gone under recently, there are 11,000 VARs in the country, he also pointed out.

“”The point is the VAR community is doing extremely well,”” Tobin added, “”but more is being done by fewer.””

While the economy has picked up a bit, resellers won’t be seeing greatly expanded spending in the next two years.

This year IT spending is forecast to grow 2.7 per cent over 2003, said Dennis Vance, IDC Canada’s group vice-president and chief research officer. That includes growth in hardware purchases of just under one per cent. On the other hand, software sales are expected to grow 3.4 per cent over last year, and services by 3.9 per cent.

Overall, IT spending in Canada this year will hit $35.3 billion this year, $36.2 billion next year and $37.2 billion in 2006.

Vance also produced this statistic: Sales of storage devices are expected to leap six per cent this year over 2003. However, storage capacity is expected to grow by 40 per cent – graphic evidence of the price squeeze in that sector. Spending a little is increasingly getting buyers a lot of hard disk space.

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Jim Love, Chief Content Officer, IT World Canada

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Howard Solomon
Howard Solomon
Currently a freelance writer. Former editor of and Computing Canada. An IT journalist since 1997, Howard has written for several of ITWC's sister publications, including Before arriving at ITWC he served as a staff reporter at the Calgary Herald and the Brampton (Ont.) Daily Times.

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