Motorola prepares word on sharing Avnet space

Electronic News, July 5, 1993

PHOENIX--Motorola this week is scheduled to provide a "clarification" of its policy of sharing distributor line cards with semiconductor rivals, reportedly clearing the way for Avnet's new Hamilton/Hall-Mark combine to gain unprecedented access in the U.S. to Motorola, Texas Instruments and National Semiconductor.

"We're truly in a market that suggests stability is the best course of action until further notice," said Chuck Thompson, senior vice president and director of world marketing for Motorola Semiconductor Products Sector. He noted that with widespread product allocations, customers would not be served if distributors were to abruptly drop product lines. "We're after stability in the marketplace, not disruption."

Added Brian Hilton, Motorola corporate vice president and director of worldwide semiconductor distribution: "This whole line card issue is so emotional." Consequently, "Our position will be clarified" this week about sharing shelfspace with competitors.

While declining to provide details, Mr. Thompson noted Motorola's primary concern has always been that its distributors "are able to focus efficiently on our product line." He added "We're not interested in serving the market through a 'price club,"' where, with too many semiconductor vendors on a distributor's line card, pricing would take precedent as a selling point rather than technical support.

Avnet's ability to hold onto Motorola, TI and National has fired industry speculation since the distributor disclosed plans in April to acquire Hall-Mark in a $485 million deal (EN, April 26). Avnet already carried Motorola and National; Hall-Mark had Motorola and TI. All three lines represent well in excess of $50 million annually.

As reported (EN, June 21), Avnet last month officially engaged with TI, thereby raising questions as to National's long-term presence on the Hamilton/Hall-Mark line card--especially since Mr. Hilton had said "Our historical line card position has not changed" with regard to sharing the same shelf with both TI and National.

An industry source last week said National and Avnet are scheduled within the next couple of weeks to announce a re-commitment to their "lifelong franchise agreement" signed early last year. Hamilton/Avnet has carried National since 1960, and the line reportedly now generates between $100 million and $120 million worldwide for Avnet.

If Avnet should succeed with this triple play, it would represent a sharp reversal from early last year when Arrow Electronics was obliged to relinquish National--a franchise said to be worth as much as $65 million--in order to resolve a similar line card conflict that developed with its acquisition of Lex Electronics (EN, Feb. 10, 1992). More recently, Arrow completed the purchase of military specialist Zeus Components, again bringing the semiconductor trio under one roof. Given Mr. Thompson's view that "stability is the best course of action," it now appears that Arrow will be able to hold onto all three military lines. Whether Arrow, which has TI and Motorola in its Arrow/Schweber semiconductor division, will now seek to re-engage with National for the commercial portion of the line is an open question.

Curiously, Avnet has been able to carry TI, National and Motorola in its U.K. subsidiary, Avnet Access, without any apparent expressions of concern from vendors. Avnet is also franchised for National and Motorola in France, and for TI and National in Scandinavia. But mind-share has proved a much more volatile issue in the U.S.

National, though, has softened its previously adamant unwillingness to share distributors with both Motorola and TI. "Our concern is that (the distributors) focus on National, not necessarily who they have on their line card," said Chuck Bartlett, vice president in charge of National's North American distribution, in a recent interview. As for Avnet, "We have a very strong relationship with them worldwide," Mr. Bartlett said, adding "We're putting together a lot of training right now" to bring Hall-Mark sales and marketing personnel up to date on the line.

TI has consistently indicated a willingness to live with such a line card menage a trois. "If (the distributors) perform to agreed-on levels, what they do with their line cards is their business," said Skip Streber, distributor sales manager. He said TI works to develop business plans with its partners that will enhance net profitability, which will hopefully prompt distributors "to reward those most profitable suppliers with the best positioning."

Avnet, meanwhile, last week completed the purchase of Hall-Mark. As of July 1, the effective date of the acquisition, each share of Hall-Mark stock was automatically converted into the right to receive $20 in cash plus 0.45 of a share of Avnet common stock. Leon Machiz, Avnet chairman and CEO, noted the merger would result in "the world's largest components distribution entity with consolidated sales of about $3 billion, the industry's finest line card and its broadest inventories and array of value-added services."