Seagate’s remaining distributors poised to benefit from eSys cut

Seagate’s UK distributors are hoping to reap the rewards after the storage giant decided last week to axe eSys, its largest distributor.

Following a six-year relationship, Seagate has terminated its contract with Singapore-based eSys after the distributor denied Seagate access to its accounts.

In a filing to the US Securities and Exchange Commission on 7 November, Seagate said: “In early October we initiated an audit of eSys’s point-of-sale records, pursuant to our contractual rights, to confirm the accuracy and completeness of eSys’s claims for programme credits under our distributor sales incentive programmes.

“Last week, eSys officials informed us they would deny our third-party auditors access to eSys’s records to perform the requested audit.

“ESys officials also indicated that an audit would likely reveal irregularities in eSys’ compliance with the terms of our incentive programmes and other unspecified irregularities. In addition, eSys has failed to make full current payments on its obligations to us.”

ESys has pledged to pay all outstanding payments owed to Seagate. According to Seagate, as of 5 November, eSys owed about $50m to the vendor.

Pavan Gupta, regional director for Europe at eSys, told CRN: “There are different types of audits, and while we were happy to have an inventory audit carried out, we did not want the direct system audit carried out because we felt it was too intrusive.”

Seagate’s remaining distributors in the UK – Actebis, Bell Microproducts, CMS Peripherals, Computer 2000, Hammer and Ingram – are now hoping that some of eSys’s business will come their way.

Eddie Pacey, director of credit at Bell Microproducts, said: “There has clearly been a significant breakdown between the two parties because eSys was a sizeable distributor. This should open up opportunities for Seagate’s other distributors and Bell will be aiming to fill the void that eSys has left.”

James Ward, managing director of Hammer, said: “We have been an authorised Seagate distributor for

nine years and auditing is part and parcel of a transparent and successful relationship between a vendor and a distributor.

“I see this as a positive move because it maintains channel integrity. We will endeavour to continue working with Seagate to increase market share.”

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