Maxtor gets serious about stopping grey market

Franziska Hanreich, Maxtor Corp.’s new director of channel compliance understands her job will be next to impossible to accomplish.

The former director of financial planning and director of business planning at the Milpitas, Calif.-based hard drive maker has been mandated to eradicate grey

market activities and counterfeiting of Maxtor products.

Maxtor, which endured a November financial and CEO losses, created this position for Hanreich.

According to the Alliance for Grey Market and Counterfeit Abatement (AGMA), a group made up of 10 IT vendors (Nortel Networks is Canada’s only member), grey market activity accounts for more than US$40 billion in losses worldwide for IT companies.

Hanreich admitted she is not naïve to believe she will be able to eliminate grey market activity all by herself.

“”There is no silver bullet,”” she said. “”My approach will be to get input from customers and concentrate on inventory management and have a consistent pricing policy.””

The problem of grey market, in Maxtor’s eyes, stems from price forwarding and false reporting. Counterfeit is a small part of the problem, Hanreich said. So her first plan of action will be to have no more than four to six weeks of inventory in the channel.

“”Our approach, and the industry’s as a total, (was) to address grey market as it comes up or deal with it as an isolated incident,”” she said. “”Now we are more dedicated. We will have a more comprehensive and direct approach and we will not be reactive to grey market activity.””

Hanreich could not pinpoint the differences in grey market activity between the U.S. and Canada, satying it was too early to give an accurate comparison. She did say, however, that the grey market problem in America will show up in China, and that anything in Europe will affect Canada. “”We have to look at all geographies to try and see uniqueness. This is a worldwide problem,”” she added.

To even make a dent in grey market, Hanreich said Maxtor has to work with its distribution partners around the world. She plans to co-ordinate externally and internally to put in place tools for identification prediction to ensure best practices are followed by all.

“”It all comes back to inventory management and if we keep it tight and balanced there will be much less room to play,”” she said.

She also said there are only methods such as prosecution and stiff fines for grey market activity. Some AGMA members, she said, have taken this route. She hasn’t yet start evaluating those options.

Last September, Hewlett-Packard, another member of AGMA, filed suit to recover more than US$8.6 million in pricing discounts for computer equipment that defendants falsely claimed were purchased by Capital City Micro, Inc. of Tennessee for resale to P & E Distributing of Kentucky.

HP’s complaint alleges that Capital City Micro told HP that the reseller had opportunities to sell HP and Compaq products to a beverage wholesaler called P & E Distributing that required significant discounts from HP to win the business.

HP’s complaint further alleges that Capital City Micro did not resell the products to P & E Distributing, as represented, but instead sold to companies and/or persons to whom Capital City Micro had no authorization to sell.

“”The challenge is sizable. Even a dollar per drive is sizeable for us,”” said Hanreich.

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Jim Love, Chief Content Officer, IT World Canada

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