Publications

15 January 2000

The Russia Journal

The Russian path works, Verysell says

A Russian computer-technology distributor says it recorded record sales in the final quarter of 1999, a result attributed to its strategy of buying stakes in domestic firms and not linking up with a Western partner. Verysell, which distributes computers and software, hiked revenue by $2.2 million to $52.2 million last year, the company said. While the full-year figure falls short of 1997’s $62 million high, the firm expects to beat all its records in 2000. It had sales of $19 million in the fourth quarter of 1999, its best period ever.

Officials of computer-technology distributor Verysell report revenue results last week. [TRJ]

Russia’s market leader in Compaq and Microsoft sales, Verysell decided to forge ahead in a new direction after a cooperation pact with U.S. firm CHS Electronics in 1998 fell through.

The U.S. firm was brought to the verge of bankruptcy last year, forcing it to abandon a scheme to take over the then-renamed CHS Verysell. Although CHS Electronics has yet to formally scrap the plans, the Russian company has, in effect, been left without a partner.

Verysell group President Mikhail Krasnov said the news prompted the company to take a gamble on buying controlling stakes in similar Russian firms, expanding its range of business to offer system integration to clients and to sell computers and software over the Internet.

Krasnov said the first Russian company to be added was Fargo, since renamed Vintegro. The systems-integration company is U.S. firm MicroAge’s exclusive partner in Russia.

Krasnov pointed to the strong fourth quarter and said the decision not to look for a new Western partner is paying off.

"Until recently, it was thought that the development of distributing businesses in Russia was hindered if the company did not have a solid partner or distributor with a world name," he said.

Negotiations are under way to bring new companies into the group, although he refused to name Verysell’s future purchases.

Industry observers say these could be firms with technology to sell over the Internet, one of the spheres considered most profitable by Verysell’s management.

"Until the present day, we had a company Web-server, but it was a kind of fad and was therefore not effective," said Verysell Senior Vice President Vladimir Nikiforov. "We want to restructure it so that it can effectively serve our customers, and we hope that soon we will be able to start electronic sales."

Verysell was founded in 1990, with U.S. distributor Merisel as its main shareholder, operating under the U.S. firm’s trademark. In 1994, the Russian company acquired new shareholders – the Framlington Investment Management and First Russian Frontiers investment funds, and the Kolchuga fund founded by French bank Credit Commercial France.

In 1995, Merisel found itself in financial difficulties and was forced to sell its units in Europe and Latin America. The three funds bought out part of Merisel’s share in the Russian operation, with the rest going to other investors.

By Polina Zvereva