Computer Associates International Inc has signed an alliance with computer products distributor CHS Electronics Inc that will see the software and services giant invest up to $50m in CHS. The deal calls for CHS to supply CA with the marketing, distribution and reseller rights to its product catalog in return for the cash.
Miami-based CHS claims to be the largest computer distributor in Europe and Latin America and the third-largest in the world, with operations in 46 countries and relationships with over 150,000 resellers. CA says the arrangement will provide a boost for its growing services business, as it will now be able to easily offer clients a wide variety of hardware, software and peripherals – and still maintain its hardware neutrality.
CHS, for its part, will use the proceeds from the investment for working capital purposes. The company has hit hard times recently and yesterday posted first-quarter net income down 99% at $234,000 on revenue up 41% at $2.5bn. Despite strong sales, CHS has seen eroding margins amid industry-wide pricing pressure. The company plans to cut 10% of its workforce and take a charge of $12m to $14 for restructuring costs. It also recently had to restate past earnings due to accounting discrepancies.
The deal between the two companies follows an agreement struck last month that will see CHS bundle CA’s software with server, desktop and storage products distributed in Europe, the Middle East, Asia and Latin America. The bundling arrangement is expected to start in June in the UK market.
