Some HP products to flow with Fluke in distribution plan

Electronic News, April 28, 1997 by Judy Erkanat

Bill Parzybok, chairman and CEO of Fluke, characterized the agreement as a distribution alliance between the two companies. "We had a meeting in Santa Clara last September to see if we could cooperate to better serve the markets we address," he told Electronic News. "The outcome is this alliance. Over 90 percent of Fluke products in the U.S. go through distributors. Now the same customers want to buy some HP products. HP had not used distributors for basic products prior to this, and now it doesn't have to re-create a distribution channel. We have ours and they will use it. Also, HP will be selling seven of Fluke's products directly to its customers. All products will keep distinct company names and labels."

"We are continuously looking for ways to make it easier for customers to buy HP test technology," explained Larry Potter, VP and GM of the HP Test & Measurement organization's worldwide field operations. "This alliance enables HP to leverage Fluke's marketing expertise and its successful worldwide distribution channel to connect with a large number of engineers and technicians historically not reached by HP's direct sales force."

Mutual Rival

Fluke and HP have a mutual competitor in Tektronix, putting the agreement in the light of a potential anti-Tek alliance.

"This is not an anti-Tek alliance," said Rick Wills, VP and GM for the Instruments & Tools business unit of Tek's Measurement division. "We have a tremendous amount of respect for HP and Fluke. All three of these companies have been around for 50 years. We are all innovative, smart and listen to our customers. Going into distribution is just a natural thing."

He spoke of the distribution model becoming a global phenomenon and predicted more of the move to distributors in the future.

"I am surprised HP didn't move into distribution one or two years ago," Mr. Wills said. "Tek switched this class of product to a distribution channel three or four years ago. A customer-driven company like HP should know distribution is an important part of our business. Retaining its direct call-in orders on the same products could confuse customers. We shut down our 800 number due to such confusion and after deciding the distribution network worked better."

An industry analyst disagreed.

"Tek enters into both companies' reasons for going into this alliance," said Galen W. Wampler, director at Prime Data instrumentation industry services. "Most distributors sign with two major companies--in this case, Fluke and Tek. With this agreement, HP gets into the distribution channel through Fluke easily, getting HP product on the shelf without having to fight for the space and displacing someone else, like Tek."

Mr. Wampler said Tek's recent success with its portable oscilloscope and other portable products led Fluke to HP for distribution of Fluke's handheld scope. "Fluke's market share did not shrink, in spite of Tek's recent success," he said. "Tek as a competitor is a factor in all of this. HP does not have to do this, but through the Fluke agreement, it gets immediate access to the distribution marketplace without a lot of new product development."

The Fluke and HP product lines have evolved independently over the past five years to the point where many products are now complementary, setting the stage for some mutual distribution and marketing. A distribution and marketing plan will be launched immediately in the U.S., with others to follow in countries around the world during the next several months.

"This contract responds to customers' desire for the additional convenience of buying HP basic instruments from distributors," said Mr. Potter. "Equally important is that this contract allows HP to augment its traditional bench test and measurement equipment with Fluke's handheld test tools, addressing the new need of a large segment of HP's customers, R&D engineers, for portable, multifunction test tools."

The alliance enables Fluke to provide distributors a larger, complementary selection of products and broadens the audience for its own products, which typically were purchased by technicians and engineers for service, installation and maintenance in electronic and electrical applications.

Mr. Parzybok is a former HP test and measurement executive, so there is shared history between management, which Mr. Parzybok admitted had something to do with the alliance. "I still know a lot of people at HP, and I know Larry Potter, HP's T&M marketing guy," he said. "We discussed working together. Years ago we competed, but now Fluke's products have evolved into different areas."

During the past few years, the needs of HP's target market of R&D engineers broadened beyond lab-bench instruments to tools they can carry to other locations. Besides portability, these engineers want to rely on multifunction test and measurement tools that provide greater utility and are easy to learn and use. HP's basic instruments portfolio was broadened to meet these needs.

Meanwhile, Fluke was developing products delivering high performance in a portable package for service, installation and maintenance professionals. This trend accelerated in recent years as electronics became more pervasive in commercial and industrial environments.