Software Spectrum absorbs Egghead fed biz, aims for larger market

Two months after acquiring Egghead Inc.'s government business Software Spectrum is taking steps to position itself for a major role in the federal reseller market according to company officials and industry vendors.

Software Spectrum announced in late March that it would take over Egghead's corporate government and education (CGE) business. The deal finalized in late May is worth $45 million.

Since then Software Spectrum has dedicated Egghead's old call center to handling CGE customers expanded its own General Services Administration schedule to include many products formerly offered by Egghead and opened a federal office in the Washington D.C. area with a dedicated staff of a manager and two sales people.

"Software Spectrum had a presence on the GSA schedule but not a significant presence " said Lorraine Castorina director of North American sales for Software Spectrum. "Egghead had a fairly robust federal business established."

The acquisition of Egghead's CGE unit approximately doubles the size of Software Spectrum. The company reported net sales of $384 million in calendar 1995. With the addition of Egghead's CGE business total sales would be $767 million.

CGE Adds Size Visibility

Software Spectrum has increased the number of vendors whose products it offers on the GSA schedule by half to 40. But the reseller cannot estimate how much its sales have changed since the takeover Castorina said.

The acquisition gave Software Spectrum the size visibility and resources to grab a major share of the federal market while relieving Egghead of a stumbling portion of its business according to Jan Morgan an analyst for International Data Corp.

"Egghead was having tremendous problems " Morgan said. The company's sales on the GSA schedule slipped badly last year she said.

The transfer of the CGE business lets Egghead concentrate on retail consumer sales while helping Software Spectrum intensify its government effort according to Software Spectrum.

"We have made a serious commitment to the federal business " Castorina said. "We are very excited about the opportunity to serve this market." Software Spectrum inherited contracts with the departments of Defense Interior and Justice as well as a GSA schedule business she said.

So far the company has handled the transition well enough that vendors have seen no drop in sales. "I don't see them losing any ground " said Rick Carlson director of major market operations at Novell Inc.

Novell is looking for Software Spectrum to be one of its main conduits for supplying federal customers on the GSA schedule Carlson said. The company also uses Software Spectrum to fill orders that Novell receives directly for upgrades and maintenance he said. The reseller can provide customers with products and provide customer support functions that Novell does not he added.

"I viewed the combination of the companies as a bonus for Microsoft " said Monique Henderson the GSA program manager for Microsoft. Egghead had a strong federal sales force while Software Spectrum is strong in technical expertise she said.

"[Software Spectrum's technical expertise] is a great thing for the sales people to have behind them " Henderson said.

Value-added business is an increasingly important component of the federal business for Software Spectrum Castorina said. "There is an opportunity for us to go back and talk to customers about maintenance and technical support " she said.

The company can provide consulting services training and technical support as well as off-the-shelf software.