MB Tech targets R1bn with new venture

By Nicola Mawson for MB Technologies

Johannesburg, 09 Feb 2007

MB Technologies' joint venture with global IT distributor Ingram Micro, effective from 1 June, will allow it to tap into a market worth as much as R10 billion a year, it says.

The local IT distribution company hopes to see the venture reach R1 billion in revenue in its first year.

The 50:50 joint venture will initially target the component sector of the local market, says MB Technologies CEO Leo Baxter. The company will later look at assembling products locally, taking on industry heavyweights such as Mecer, Pinnacle and Sahara.

While the company is strong at the top end of the market, with its Tarsus range, the venture will allow it to tap into the component and locally-built segments of the market, which account for up to 70% of local volumes and 55% of local PC revenues, he notes.

Ingram, says Baxter, is a global player with a strong balance sheet and cash flow, and a projected turnover of about $30 billion. As a result of its size, it is able to source the best pricing worldwide, which will enable the new company - Ingram Micro SA - to offer competitive prices. "It's going to have a dramatic impact on the market ... no one can buy bigger volumes."

No underdog

Baxter says the move was a result of MB Technologies reaching market saturation in its current tier and having to grow into new markets. However, setting up a company from scratch with enough size to source the correct components at the right price would require significant economies of scale. "We would be coming in as real underdogs."

The deal allows MB Technologies to make use of its current distribution channels, he says. The company has a presence in countries such as Namibia, Botswana, Mozambique and Zimbabwe. Other offices in sub-Saharan Africa will be opened as required, says Baxter. Until then, the company will use the Johannesburg office as a distribution base.

Baxter could not comment on who will be appointed to head up the new organisation as the decision is not MB Technologies' alone to make. However, he is confident the appointee will be from within the company.

Ingram Micro SA will target a turnover of R100 million a month and will hire at least 150 staff, he says. Investment in the firm will be substantial and much of Storgate's infrastructure has already been moved into the new entity, he adds.