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Logicalis Goes On Buying Binge

Logicalis, one of Hewlett-Packard's largest enterprise server and storage solution providers, Monday reached an agreement to acquire Solution Technology Inc. (STI), a $90 million IBM Business Partner. It also says more acquisitions are on the horizon.

"This gives us a big seat at the [IBM] table," said Logicalis CEO Mike Cox.

Logicalis, Bloomfield Hills, Mich., is also on the verge of growing its HP business through a pending acquisition, Cox added. "We want to leave no doubt that we are HP's largest enterprise server and storage solution provider and that we have a clear commitment to HP," he said, noting that Logicalis has signed a letter of intent to acquire a regional HP-only solution provider. Cox declined to identify the company because the deal won't be finalized for several weeks.

Logicalis did about $85 million in HP business last year, a growth of 4 percent over the prior year.

Cox said Logicalis needs the geographic reach, technical certifications and the IBM value-add authorizations from Indianapolis-based STI to establish itself as a major national IBM player. Logicalis, which did about $10 million in IBM business last year, is on track to grow that business organically to $20 million this year, he said.

"The reason we couldn't grow that business quicker is that almost all that business was net new to IBM because of their compliance rules," Cox said. "We didn't have the installed base that we had earned the right to go back to. And any other existing IBM customers were owned by other IBM resellers, and [IBM] does a good job protecting those guys."

IBM has a strict set of compliance and value-added rules that discourage multiple Business Partners from going after the same accounts.

STI will operate as a subsidiary of Logicalis until the end of the calendar year. In 2005, Logicalis will integrate STI into existing operations and create distinct HP and IBM sales and technical divisions.

As to future acquisitions, Cox said he's primarily looking at HP regional solution providers but is also considering Cisco Systems solution providers and services companies.

"We see a lot of consolidation coming and we wanted to get a head start," he said.

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