Eurodis Electron plc shed its computer products and services division in Switzerland last month to concentrate on electronic components distribution in Europe. The distributor entered into an agreement with Bechtle A.G., Gaildorf, Germany, to sell Eurodis DATA for $11.5 million.
The move completes Eurodis' eight-year plan to eliminate "noncore activities" and acquire companies to strengthen its hold on design-in activities throughout Europe. As part of the strategy, Eurodis last March opened the Wireless Technology Centre in Stockholm to focus on Bluetooth and other wireless protocols.
The strategy has helped the Surrey, England, company increase its market share in a down economy, according to chairman Robert Leigh.
"Eurodis managed to increase its market share by 1% during the last 12 months," Leigh said. "I'm not uncomfortable in the No. 3 position; however, we believe the No. 3 player should at least have double its current market share."
Eurodis is the third-largest distributor in Europe, with 6% of the market, trailing Arrow Electronics Inc. and Avnet Inc., each with 25%, according to analyst estimates. For its fiscal year ended May 31, 2001, Eurodis DATA contributed roughly $38 million in sales and $2 million in earnings to a total group operating profit of $27.5 million.
As a technical distributor, Eurodis generates approximately 60% of its revenue from design-in activity. Sales in fiscal 2001 reached about $634.7 million, up from $437.1 million in 2000. The distributor will report its first-half fiscal 2002 revenue this week.
Eurodis' plan is not without risk, according to analysts. While the decision to dispose of its computer-related business allowed the company to specialize in electronic components, it also increased its vulnerability to a cyclical industry.
Leigh said the choice was an easy one because Eurodis DATA operates in only one country and within a consolidating industry. The division is entirely dependent on IBM Corp. and Compaq Computer Corp. for its sales revenue.
"There's probably a little more consolidation to come this year in the components industry too," Leigh acknowledged. "It just so happens in that industry, we have been one of the consolidators."
As part of its strategy to gain European market share, Eurodis last year completed the "painful and expensive" process of connecting 53 facilities in 19 countries to one IT platform, Leigh said. Obtaining compliance from various legislatures across Europe proved difficult, but the move was necessary to increase efficiencies, he added.