HARRISBURG, PA. Trying to manage the number of assets it has acquired in the past 18 months, Tyco Electronics Corp. has turned its attention to the tangle of distributors trailing along behind its growing list of acquisitions.
Ray Horner, director of distribution sales and marketing, said Tyco plans to disengage with a number of distributors, noting that 15 had been dropped as of early August. Distributors like Pioneer-Standard Electronics Inc. and Future Electronics Inc. were not released for lack of performance, he said, but because of Tyco's growth. Excluding its Raychem group, Tyco is pushing $750 million through distribution in 2000, with the help of its new divisions and the AMP interconnect line. But along with the past year's $8 billion in acquisitions came dozens of distributors, small and large. The list needed trimming.
"Our distribution roster is not going to be stable as long as we continue to acquire," Jack Voelmle, Tyco's general manager of U.S. sales and marketing, said at the Electronics Distribution Show in May.
Tyco said it paid about $750 million for its most recent acquisition, Thomas & Betts Corp.'s Electronic OEM division, which boosted its share of the electronics interconnect market. Tyco merged the electronic-product line into its own network, eliminating the need for Pioneer, Future and others. The list of cuts also includes Esco LLC (Irvine, Calif.) and Buse Industries (Bridgeton, Mo.).
"Customers have begun to use distribution for more than typical services," Horn-er said. "We will continue to be selective in our distribution channel. Each company Tyco purchases brings a new set of circumstances to the mix. We will continue to rationalize the channel to maintain the maximum value for our product line in the marketplace. We don't want to dilute the value of our product line to our customers."
Consolidation is nothing new to Tyco. Its first big move came last May, when it cut 24 of Potter & Brumfield's 67 distributors after acquiring the P&B product line last year from Siemens AG.
Horner admits Tyco considers its distribution channel to be the fulfillment arm that provides customers with more choices, a service that retained distributor Avnet does well, said Wally York, vice president of marketing at Pioneer. "We provided very little distribution business for Thomas & Betts," York said. "So when the manufacturer acquired T&B, Tyco decided not to expand its entire franchise to us."
Tyco will keep most veteran AMP distributors, including Arrow, Avnet, Kent Electronics, Sugar Land, DAC and TTI. A number of Thomas & Betts and Potter & Brumfield distributors are also being retained, including Sager Electronics and Carlton-Bates, which will add the AMP line.
Based on Avnet's capabilities and Tyco's need, the distributor anticipates their relationship will grow from $400 million to $500 million within the next two years.
Laurie Sullivan is associate editor for distribution at Electronic Buyers' News, EE Times' sister publication.