Who wants to be a millionaire?

The channel loves to complain about falling margins but there arestill healthy profits to be made in the industry for those who know how.Drew Cullen breaks the last social taboo to pore over some interestingbank balances and reveal how the canny players have built up their wealthover the past 10 years

In certain circles, money is seen as an impolite subject of conversation.

But this social taboo carries little weight in the UK channel. Who has got it, who is getting it, who is worth what? These are all favoured topics for after-dinner speculation in this fiercely entrepreneurial industry.

Dealer principals are rarely so vulgar as to discuss their own personal worth, but are more than happy to discuss their competitors' margins or sales per employee and their assorted tactics to create wealth.

Resellers tend to be optimistic individuals on the whole, but collectively they seem to suffer from a deep-rooted pessimism. Gather a few dealers on to a reseller council and you will hear endless hard luck stories of dealers getting shafted from all sides - by the margin-chopping manufacturers, by credit managers who just like to say no, by price-slashing rivals and by ungrateful customers demanding more service for less money. All that talk of get big, get niche or get out must be wearing them down.

But the doom and gloom is a little over-egged. Margins may be at an all-time low and dipping all the time, but think of the sales volumes pumping through the channel. There is a vast and growing amount of money swilling through the industry.

More than enough to ensure that computer millionaires are 10 a penny.

You have only to witness all those Comdef delegates climbing into their Mercs and Beamers after a hard weekend's conference to see the prosperity generated within a channel, which if we treat the 1981 launch of the IBM PC as our starting point, is just 15 years old.

The industry has even thrown up a few super-rich players. People like Specialist Computer Holding's Peter Rigby and Computacenter's Philip Hulme and Peter Ogden have all been outed by The Sunday Times league table of the richest 500 people. This accolade may prove an unwelcome intrusion - just think of all the sackloads of begging mail.

Rigby is in a league of his own, The Sunday Times would have us believe.

The newspaper places a price tag of more than u250 million on SCH, an estimate that appears to be placing a substantial premium on the company's Byte retail chain. Rigby and family own most of the company, so ipso facto, he is worth u250 million.

Computacenter is, by contrast, valued at about u200 million by The Sunday Times - even though the company is 60 per cent or so bigger than SCH.

It looks as if The Sunday Times is misfiring with at least one of its valuations. Ogden and Hulme each hold about 25 per cent of the company, valued at u50 million each. And Ogden's wealth apart from Computacenter is valued at another u5 million.

We shall never know what either Computacenter or SCH is really worth until their principals choose to let the markets decide through a share listing or by organising a trade sale. Neither of these options looks likely at the moment.

Either way, Rigby, Hulme and Ogden could certainly give Croesus a run for his money. This trio have made their money by selling products and services, on the back of slick logistics, to very large corporates.

But there are plenty of other ways of creating wealth in this industry.

Commodity trading, for example. PST's larger than life owner Howard Strowman has made shed-loads by the simple expedient of paying cash for excess vendor inventory and selling it on to Eastern Europe and the third world.

How rich is he? Howard's not saying. Our wholly random estimate runs to eight rather than seven figures.

A very few people have made their fortunes through remarketing companies, acting as UK agents for US vendors before they hit the big time. Peter Ferguson and Michael Skok, for example, both hit the jackpot when they were bought out respectively by Wordperfect and Symantec.

Other remarketers are plying their trade today. Roderick Manhattan Group is a notable example, and Protege, the brainchild of industry heavyweights Larry Levy, Alistair Handyside, and David Aldridge, looks an interesting business. But it is very unlikely that any UK company will ever again experience the bonanza of Skok and Ferguson.

But let's look on the bright side. The UK channel has thrown up a number of names of people who are merely very rich, and whose wealth - at least as expressed in the value of their publicly quoted company shares - is open to public inspection.

Bubbling under the ST richest 500 (you need u30 million to climb aboard that wagon) is a clutch of distributor principals who have made it into eight-figure territory. Northamber's David Phillips owns just over 50 per cent of the company, a stake worth more than u24 million. And that, you have to agree, is an awful lot of printers. Northamber looks distinctly undervalued when compared with some other companies in the sector - perhaps it has been around too long to excite City slickers. Or perhaps the City is marking down the Northamber shares because of the chairman's unshakeable majority stake.

Ideal Hardware's triumvirate of James Wickes, Kevin Harper and Simon Barker have also catapulted into the ranks of bulging piggy bank holders through their company's 1993 flotation. Their collective shareholding is worth about u60 million, according to Data Stream's most recent figures.

There's money in them thar storage devices.

I once spoke to Wickes about his wealth. He ignored my advice to take the money and run, and instead told me of his burning ambition to make his company bigger, better and stronger. This could explain why he is a multimillionaire and I am not.

For a few people, memory has proved to be a neat little earner and, indeed, an enormous money-spinner for Steve King and Ian Boyle at Datrontech, who own 40 per cent and 25 per cent respectively of the company, says Datastream. Their stakes, on 15 August, were worth u27.4 million and u17.1 million. Not bad, but considerably less than the dizzy heights they had reached earlier this year.

Remember folks, shares can go up as well as down. Datrontech's shares plummeted by nearly half earlier this year from a high of 365p to just 187p at one point.

The City has cottoned on to the fall in memory prices and has been marking Datrontech's shares accordingly. Happily, the Aldershot distributor has increased its options through an acquisitions policy which has spread more wealth around the channel.

Perhaps the happiest man at Comdef 96 was Neil Ledger, who that week netted more than a million pounds from the sale of his share in Data Connectivity Solutions to Datrontech. The diversification also meant that Datrontech's results turned out to be quite tidy in spite of the fall in memory prices.

Networking has also been a useful wealth multiplier for many in the channel. Persona and Azlan command handsome valuations from the City, which appears to be infatuated with any company that is associated with this high-margin technology - even distributors.

The key people in these companies hold smaller stakes than their counterparts in other quoted distributorships. But Wayne Channon at Persona comes in at u9.8 million, and Christian Martin at Azlan is still worth more than u7 million, according to Datastream's most recent figures. David Randall's Azlan stake was worth more than u10 million at its highest point (though one suspects he may have scaled down his shares since the Datastream report).

Two of the non-executive directors, Mike Brooke and Gordon Skinner, also figure in Azlan's stake as holders of u8 million of shares between them.

Brooke and Skinner are survivors from the first round of industry flotations in the 80s. The duo, responsible for the mid 80s flotation of MBS, at one time the UK's biggest dealership, remain active players as sources and raisers of venture capital for the market.

The 80s channel flotations included Logitek, Fletcher Dennis, Essex and City, Personal Computer and the Ferrari Group. Some of the principals made serious amounts of money so long as they disposed of their stakes in time. Sadly, most of these companies stumbled at one point or another.

But some live on. Logitek is still trading. Essex and City, the creation of Gerry Redman (how much is he worth?) and Fletcher Dennis, survives as the basis of the UK operation of Info' Products. Personal Computer has long since folded into P&P, which together with Northamber, is another survivor from the 80s stock market channel boom. Company founder Pete Fisher still holds a 10.4 per cent stake in the company, worth u11.91 million.

In recent times, few dealerships have returned to the stock market fold - Compel and Action Computer Supplies are exceptions. But most have been put off by the high costs of flotation and City suspicion. The City got its fingers burned by channel companies in the early 90s and is in no hurry to repeat the experience.

The AIM market is showing promise as a cheaper source of financing - flotations tend to be smaller, and investors more adventurous. But the market still fails to manage the trick of transforming company assets into personal wealth.

Channel shares tend to be illiquid, with small parcels being passed around a few institutions. And institutions are, on the whole, wise to companies whose executive dispose significant shares. It becomes harder each time to sell slugs of shares without heavy discounting.

That is where the trade sale comes in. This is by far the simplest and most elegant method of liquidating company assets into personal wealth.

The trade sale is also a useful device for analysts and journalists. The prices buyers pay give a rough idea of what other companies are worth.

Gutkin and Summers are thought to have pocketed u15 million between them when they sold Planning Consultancy to SHL Systemhouse.

Derek Lewis, a hero of the channel, who bought and sold Technology plc at least twice, is supposed to have pocketed u14 million of ICL's money when in 1993 he walked away from the company he founded for the last time.

Who knows? The figure may even be true. Now Lewis is back in the fray, at the head of Vertex, United Utilities' u200 million outsourcing subsidiary.

Plenty of wealth-creating opportunities there.

There are plenty of willing buyers to be found in the market today. Specialist Computer Holdings is an occasional purchaser: Scotbyte and the maintenance arm of Network SI are two of its acquisitions. P&P is also prepared to create its fair share of millionaires through its portfolio acquisition tactics, which are designed to increase the value-added mix of the company.

The former owners of QA Holdings, Myriad and Computers For Business are just a few of the recent recipients of P&P's munificence.

Now the Americans are coming. GE Capital Services, Micro Warehouse, SHL Systemhouse and Elcom International are all on the hunt for European computer dealers. Anything the Americans are interested is worth lots of money - US resellers are bigger and better financed than their UK counterparts because their share prices are typically valued at 20 times earnings, compared with an average of 12 times earnings in the UK.

There are also plenty of willing sellers. The UK channel is now in its mid-teens, which means that many dealer principals are coming up to their 40s and 50s. The greying of the industry will ensure that many dealerships will dutifully play their part in helping it to consolidate into bigger and bigger combines - even if this means selling up.

In the next few years, this process will enrich hundreds of individuals who will at last be able to transform the wealth they have created in their companies into healthy bank balances.