Supercom has sold its American arm to Freemont, Calif.-based Synnex Information Technologies Inc., claiming a tough American market made it more worthwhile for the Markham Ont.-based distributor to concentrate all its resources on Canada.
“We were not doing very well in the States,” said Supercom president Frank Luk. “We were not efficient and it (wasn’t) profitable. So I guess we should focus on Canada.”
“Synnex believes they can turn (the American division) into a profitable (operation). Synnex is in expansion mode, so we just matched.”
Three weeks ago Synnex, a privately-held distributor, purchased Merisel Canada for US$30 million in cash.
On Friday, Synnex and Supercom will officially announce the sale of Supercom’s U.S. division. Luk said financial terms of the deal will not be released. Supercom has 80 employees in the United States, most of whom will go over to Synnex, Luk said.
A spokeswoman at Synnex declined to comment on any impending purchases.
Supercom’s Canadian management took over the American Supercom last May. The two companies had been separate operations before the restructuring.
Before taking control of Supercom USA, Supercom Canada had revenues of a half-billion dollars and at the time of the restructuring, Luk said consolidating operations would allow Supercom to reach the $1 billion mark.
But a little over a year later, Luk’s vision turned out to be wishful thinking. While Supercom had $600,000,000 in revenues in Canada last year, the company’s American division pulled in only about $100,000,000.
“I thought we could turn a profit (in the U.S.), but after a year, we didn’t see a green light,” Luk said. “The market was really competitive in the U.S.”
Luk also suggested the resources Supercom devoted to the U.S. market were not enough to make the company competitive south of the border.
“Our top management was not in the States, sometimes we lost focus,” Luk said, adding Supercom failed to make timely pricing adjustments south of the border.
Supercom is not the only Canadian distributor to manage operations south of the border. Jim Estill, president of EMJ Data Systems in Guelph, Ont., has maintained an office in Raleigh, N.C. for years.
“It makes sense if a company has a non-profitable business unit for them to get rid of that business unit and provide more focus,” he said of Supercom. “But it doesn’t necessarily follow as a generalization to say that just because a company has operations in the States that they’re not going to make money.”