Arrow Electronics is broadening its solution scope. The distributor announced on Oct. 5 its intention to purchase Alternative Technology, a niche distributor with specialties in infrastructure, networking and security.
The acquisition, expected to be fulfilled sometime in November, does little to Arrow's numbers—Alternative Technology made $330 million in sales in 2005 compared to Arrow's $11.1 billion in revenue.
But Alternative's cadre of 36 vendors and its experience in a small solution set are likely to add expertise and bolster Arrow's footprint in key markets, executives and analysts said. Arrow carries more than 250 vendors in its own lineup.
"We believe that Alternative's market has a higher growth profile than the current ECS division," Brian G. Alexander and Bob Gruendyke, analysts at Raymond James Financial, in St. Petersburg, Fla., wrote in a research note on the takeover. "Moreover, customer overlap is minimal, and cross-selling opportunities make the acquisition more attractive."
Alternative Technologies offers VARs distribution with a twist. Click here to read more.
Arrow, based in Melville, Long Island, provided few details on the deal during the announcement. However, Jacqueline Strayer, Arrow's vice president of corporate communications, said Alternative Technology's personnel and experience made it an attractive acquisition.
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Arrow's early plans are to operate Alternative Technology, based in Englewood, Colo., as a separate unit within its Enterprise Computing Solutions division, and to maintain its current staff and management under William Botti, president of Alternative Technology, Strayer said.
Raymond James said it expects Arrow and its competitor Avnet to pursue diversification in their enterprise solutions businesses to lessen their dependence on the
"declining proprietary server market" and to "focus more heavily on segments with greater growth and profitability, such as software, networking and security."
Avnet is interested in attaining a networking unit by growth or acquisition, according to Fred Cuen, president of Americas for Avnet.
Alternative Technology keeps its focus limited and its portfolio lean—Citrix Systems, Novell, SonicWall, Wyse Technology and Blue Coat Systems are among the vendors—to focus on high-growth companies and markets and to find profits for itself and its partners.
Partners have applauded Alternative Technology in the past for this strategy, which harkens back to Botti's past as a VAR. Botti owned an integration company, FutureLink, that he sold in 1999.
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