PC Connection buys ComTeq Fed

The recent acquisition of ComTeq Federal Inc. by PC Connection Inc., a direct marketer of brand-name personal computers through catalogs and the World Wide Web, gives ComTeq Federal a prime opportunity to build its own Web sales, company officials said.

PC Connection announced its purchase of ComTeq Federal, a Rockville, Md.-based reseller of computer equipment to government agencies through its General Services Administration schedule and blanket purchase agreements, for an undisclosed price June 30.

PC Connection's established Web capability was a tremendously important factor as the deal was negotiated, said Gary Sorkin, president of ComTeq Federal. A poll of ComTeq Federal's sales representatives showed how important the Web is, he said.

"Far and away, what they said their customers were telling them was we need to improve our Web capability," Sorkin said. "So I think we are responding to our customers by combining with a company like PC Connection that has that capability."

In addition, PC Connection's broader product line, telephone and order-tracking technology, and ability to fill orders quickly were important, he said.

This acquisition, PC Connection's first since it was founded in 1982, is a significant step into the federal market for the company. Only a fraction of its $732 million in sales last year were to federal customers, and those sales were exclusively credit card buys, said Wayne Wilson, president and chief operating officer of PC Connection.

"We are not currently a GSA schedule holder, so that is a key part of what this means for us," Wilson said.

Web sales accounted for about 12 percent of PC Connection's revenue last year, he said. Five percent were unassisted sales, and the other 7 percent were sales to people who researched their buy at the site and then called a sales representative to complete the transaction.

PC Connection expects a threefold increase this year over last year in revenue from sales done at its Web site, which PC Connection has been investing in for several years, Wilson said.

ComTeq Federal, with $63 million in revenue last year, has done well by developing an expertise in getting through the government purchasing process, said Rob Enderle, senior research analyst at Giga Information Group Inc.

It is a lot easier for PC Connection to buy a company with the skills required to work in the federal market than to develop them internally, he said.

"Most companies that try to attack the federal market try to build the unit internally," Enderle said. "This at least shows the realization by PC Connection that that particular path is long and arduous."

PC Connection, based in Merrimack, N.H., was founded in 1982 by Patricia Gallup and is one of the oldest direct marketers of PCs in the country.

ComTeq Federal "has many years of experience working in the federal government area," said Gallup, chairwoman and chief executive officer of PC Connection. "That is not a core competency of PC Connection. This is basically a complementary business."

ComTeq Federal will operate as a wholly owned subsidiary of PC Connection, with no staff changes planned. In addition to its GSA schedule, ComTeq Federal has contracts with the Navy, the Federal Deposit Insurance Corp., the National Security Agency and the Internal Revenue Service.