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Tech Data wins major outsourcing deal

Technology product distributor Tech Data says it won an outsourcing agreement with GE Capital IT Solutions worth nearly $2 billion.

Technology product distributor Tech Data today said it won an outsourcing agreement with GE Capital IT Solutions worth nearly $2 billion.

Tech Data said in a statement that it will be the information technology supplier for Newport, Kentucky-based GE Capital, an integrator and provider of support and services to businesses.

Shares of Tech Data shot up 11 percent on the news. Its stock advanced 3.81 points to 38.25 in early trading.

Under the three-year agreement, which will focus on the U.S. market and is projected to generate about $2 billion in annual revenue for the distributor, Tech Data said it will become GE Capital's IT procurement, configuration and assembly, and logistics services provider.

This means that now GE Capital can focus more on its core business of providing customer service and developing business services and products, while Tech Data handles logistics, system customization, and overall product fulfillment, Tech Data chief executive Steven Raymund said in a statement.

With the outsourcing agreement, Tech Data said that GE Capital will no longer need to stock, configure, or assemble technology products prior to delivery.

The agreement comes a week after Compaq announced its plans to consolidate the number of its distribution partners in North America from 30 to 4, which included Tech Data.

As reported, both Compaq and distributors such as Tech Data had said that in the past, availability of products has been a persistent concern for customers. A Tech Data executive had said that the challenge is to emulate what direct PC companies are doing, which is to reduce inventory but make product more available.

"Our focus is on driving costs out of the procurement, logistics, and asset management functions while meeting growing demand for comprehensive multivendor solutions," Tech Data president Anthony Ibarguen said in a statement. "The outsourcing agreement we announced today with GE Capital IT Solutions exemplifies this strategy and the beginning of an exciting new era in our industry."

As part of the outsourcing deal, Clearwater, Florida-based Tech Data said it will assume control over GE Capital's 200,000-square-foot facility in Maryland as of August. The operations include a 40,000-square-foot configuration and assembly center as well as inventory stocking and fulfillment services, the company said. All of the GE Capital employees at the Maryland facility will become Tech Data employees under the deal.