Westcon targets emerging markets

By Nicola Mawson, Contributing journalist

Johannesburg, 29 Jun 2009

Westcon Group, a subsidiary of JSE-listed Datatec, aims to grow into emerging markets, expand its product base and improve margins.

CEO and president Dean Douglas, who has been at the helm for a quarter, says the group has worked to improve margins and grow into new markets.

Douglas says the company is more balanced than it has been, with Europe now the largest region in terms of sales, followed by the US. Last year, Europe accounted for $1.3 billion, and the US accounted for $1.2 billion.

The Asia Pacific region accounted for $250 million, and emerging markets, which includes Dubai, sub-Saharan Africa, SA, India and Sri Lanka, accounted for $280 million.

Douglas says the emerging markets, one of the company's target areas, will continue to grow and will become a more significant contributor to revenue, despite its operating profit contribution being down last year. In the 2009 financial year, the region's operating profit contribution was 1%, compared with 5% in the previous year.

Westcon is also targeting growth in Eastern Europe and Asia. It plans to expand into Mexico, Colombia, Venezuela, the Czech Republic, Portugal, Greece, Thailand, Hong Kong and China.

Douglas says it will also continue to leverage its presence in India, which it entered last year, and Africa, where it has a “robust” presence.

Product diversity

Westcon has shifted away from being a Cisco-centric company to being more balanced with its offerings, even though Cisco still accounts for over half of the organisation's revenue. Douglas says its security offering recently doubled in size, which will improve margins.

It has also operationally separated Cisco so that it can have its own dedicated team, and other vendors do not feel they are not receiving enough attention, Douglas says. In addition, Westcon now has more scope to offer distribution to Cisco's competitors.

The group is looking at adding new companies to its distribution channel, specifically focusing on new technologies, he notes.

Managing costs

Douglas points out that the company has trimmed its inventories and saved on working capital due to shorter lead times for many of its Cisco offerings. It has also put other initiatives into place that free up working capital, which has aided trimming debt on its balance sheet.

He says this will help the company improve margins in the future.

Westcon has also put systems into place to manage debt and Douglas does not see a problem with bad debt. The firm can also take advantage of its liquidity to buy out companies should the opportunity arise, he says.