Apple said it would allow Tech Data to act as a distributor in the United States, bringing the number of companies that serve as wholesale distributors for Apple here to three. Tech Data will form a business unit that will focus on transactions with Apple dealers, including sales, product marketing, marketing services and technical support personnel.
Adding another distributor to the mix will likely help boost sales, Apple executives and analysts said. Selling products through more distributors typically means a manufacturer can reach a larger number of retailers. Just as important, wider distribution makes the proposition of selling Apple computers that much easier for dealers. Distributors often extend credit to dealers, and using three distributors improves the chances of finding product in stock.
"It's a good indicator of stronger overall demand, because if they didn't think they could move more product, they might not do something like this," said Lou Mazzuchelli, financial analyst with Gerard Klauer Mattison.
Distribution was a major problem for Apple in its dark days. After incurring several straight quarters of substantial losses and shrinking market share, Apple was forced in 1997 to pare back the number of distributors from five to just two--Ingram Micro and Pinacor.
"When we pared down to two distributors, we had a strong business proposition for the two distributors we had," said Jeff Hansen, senior director of channel sales and distribution for Apple.
"Because it is a unique product and a different platform, in some cases (distributors) need to have special resources" to address this market, Hansen added.
In other words, the extra cost of supporting and selling the Mac wasn't profitable for any more than two companies back then. Apple also wasn't making enough computers to keep more than two distributors stocked with a flow of products. Things have changed considerably since then, though.
The company started to turn things around in late 1997 with the return of co-founder Steve Jobs and improved product availability. By late 1998, that turnaround was in full swing with the introduction of the colorful iMac. Since then, the company has come out with a new consumer notebook and has revised its professional-grade notebooks, both of which are currently selling well, Mazzuchelli said.
Now, getting more computers into the hands of customers who have revived their once flagging interest in Apple products means getting them into more stores. The deal with Tech Data should help in that regard, according to executives.
"As the market grows, there's a need for more (dealer) credit," said Hansen. Distributors typically offer revolving credit lines to dealers who ordinarily might not get loans from Apple or banks to stock their shelves with computers. "That's one of the examples of why Apple would consider bringing on a third distributor," he added.
"Apple continues to gain momentum and even stronger user loyalty within many key market segments," Steven Raymund, Tech Data's chief executive officer, said in a statement. Raymund said his company, with its economies of scale and infrastructure investments, will help the company "keep pace with the rising demand for Apple and Apple-compatible products."
Tech Data's European and Latin American subsidiaries already carry Apple products and are among the vendor's largest suppliers in these markets.
In other news, Jobs has elected not to give a keynote speech at the upcoming Spring Internet World in April. He was slated to give a speech, but backed out this week, according to a representative for the show's organizers.
The show would have marked one of Jobs' first speeches to an audience outside the Macworld and Seybold trade show circuit since a speech he gave in 1998 at the National Association of Broadcasters' convention.