Computerlinks: We want 10 per cent profit margin

Distributor aims to dodge margin crunch with refreshed business model

Ellis: Now is the time to do something about it while we have a good healthy business

Computerlinks believes it can boost profits to a level rarely seen in IT distribution since the 1990s through a radical “re-engineering” of the firm.

The next three-to-five years will see the security specialist invest heavily in non-core technologies and services with the goal of more than doubling EBITDA from 4.5 to 10 per cent.

In a radical departure from the traditional distribution model, Computerlinks also wants to eventually generate half of its profits from services.

To support this, the $800m (£520m) pan-global distributor has this week launched a new technology and services practice. The unit will focus on areas outside Computerlinks’ network security stronghold, such as virtualisation and physical security, as well as managed and professional services and training.

Mark Norman, chief operating officer at Computerlinks, said the distribution sector’s slow erosion in gross margins over the last decade meant this level of change was essential.

“[The broadline distributors] are working on one per cent net profit and we are moving towards their level of profitability. If our margins go right down we would have to take drastic action and we do not want to be pushed into that position.

“This is why we are trying to re-engineer the company so we are balancing the vendors’ intellectual property with our own.”

Dave Ellis, who is director of the new unit, agreed: "Now is the time to do something about it while we have a good healthy business."

Norman said the focus would now be on profit rather than revenue growth, a task he said has been made easier by Computerlinks’ move from public to private ownership in 2008.

“The new unit provides our future income and the core one gives us the foundation and finance to fund it,” said Norman.