The latest distie to feel the effects of a crumbling economy is Arrow, which missed third-quarter expectations (despite a restructuring fee that lowered earnings by six cents per share).
Arrow attributed this to the volatile economy and the shutdown of credit markets, combined with a changing product mix and competitive price pressure. Customers are clutching onto their dollars as they ride the economic roller coaster – and this is affecting almost every player in the channel.
Stocks have dropped on Wall Street to a five-year low and markets around the world are feeling the pain. Like other disties in its position, Arrow is planning to make “appropriate and necessary decisions and adjustments” to its business model to ensure long-term sustainability. However, it hasn’t outlined what those adjustments would entail.
It’s safe to say, however, that it probably won’t affect storage, software and services, where sales remained strong. Those changes could affect servers, where sales were much weaker.
Arrow also reduced its forecast for this quarter, given the instability of current market conditions. At this point, it’s difficult for any company to make accurate forecasts, since everything is up in the air and no one knows what’s going to happen on a day-to-day basis.
The concern, aside from a global recession, is over the reduced demand for products and services. But interestingly, Apple has actually gained shares – so there are signs that the right product or service may be able to buck the trend.
Tech Data, Ingram Micro and IBM Global Financing, which provide credit to the channel, all say that it’s business as usual. Earlier this month, Tech Data said it hasn’t been affected by credit woes and partners have as much access to credit as they did before the Wall Street meltdown (which it attributes to its documentation and research).
And, so far, it’s not changing its business model, aside from more counseling of resellers during these tough economic times.
D&H Distributing has also increased the amount of credit available to its VARs by another $15 million (it increased it by $10 million last March).
And IBM Global Financing is introducing “Why Wait?” – a financing offer designed to counter the effects of a global financial crisis. It provides a 90-day interest-free payment deferral followed by a 36-month fair-market-value lease on IBM Power Systems and Storage.
Eventually, the market will rebound, and companies will want to be in a position to react as part of a long-term strategy – and that’s where the channel fits in.
