You won't see a store on every street corner, but PC Connection is just a click away. A leading direct marketer of computer products in the US, the company sells hardware, software, networking devices, and peripherals. It offers more than 300,000 items from manufacturers such as Apple, Hewlett-Packard, and Microsoft. PC Connection also provides a range of IT services. Through its catalogs, websites, and direct sales force, PC Connection targets small and midsized businesses, large corporations, government agencies, and educational institutions, as well as individual consumers. PC Connection was founded in 1982 by chairman Patricia Gallup and director David Hall.
PC Connection operates through eight locations in addition to its 205,000-square-foot distribution and fulfillment complex in Wilmington, Ohio, and distribution centers in Kenne, Merrimack, and Portsmouth, New Hampshire; Marlborough, Massachusetts; Rockville, Maryland; Dakota Dunes, South Dakota; Boca Raton, Florida; and Itasca, Illinois.
PC Connection owns four sales companies, each of which has the ability to deliver custom-configured computer systems overnight. Small and midsized businesses (SMB) are PC Connection's largest customer segment, typically accounting for more than 40% of sales. SMB customers are served by the company's PC Connection Sales subsidiary. Large corporate accounts, handled by PC Connection's MoreDirect subsidiary, generate about 35% of revenues. Public sector customers (including government agencies and educational institutions) contribute just over 20% of sales and are served by PC Connection's GovConnection subsidiary. The company's Professional Computer Center (dba ValCom Technology) was acquired in 2011.
Sales and Marketing
PC Connection connects with customers through direct marketing channels, including telemarketing and field sales, Internet sales through its four e-commerce sites, and inbound telesales. The online retailer reported advertising expenses of $18 million, $20 million, and about $21 million in 2013, 2012, and 2011, respectively.
Business at PC Connection has been looking up as the economy recovers and gains steam. The company's sales increased for the fourth consecutive year in 2013, to more than $2.2 billion, an all-time high for the company. Net income also continued to climb: from a loss in 2009 to $35.7 million in 2013. Sales rose 3% in 2013 versus 2012, driven by increased demand from SMB customers for desktop computers, software, and networking products. Sales to large corporate customers increased 3%, partially offset by a 2% decline in public sector sales due to constraints on government spending.
Net income rose 8% over the same reporting period, on higher sales and the absence of special charges incurred in 2012.
PC Connection is focused on maintaining strong customer relations by providing good service. About 90% of sales are made to repeat customers each year. The company acquires products for resale both directly from manufacturers and increasingly indirectly through distributors and other sources. The five vendors supplying the greatest amount of goods accounted for 63% of total product purchases in 2013. They included Hewlett-Packard (25%), Ingram (24%), Synnex Corp. (12%), and Tech Data.
Looking beyond hardware and software sales, PC Connection is emphasizing service offerings that are geared to business customers. Its ProConnection services division helps companies with IT lifecycle management, software services, and optimizing servers, storage, and networks. In early 2011 PC Connection added to its services division when it acquired ValCom Technology for $11 million. ValCom similarly provides software services, storage and network oversight, and IT lifecycle management, as well as a staffing division that hires out technology consultants. ValCom continues to operate from its Illinois offices. In 2013, PC Connection was chosen by Microsoft to participate in the Microsoft Devices Program, which will allow it to sell Surface Pro and Surface RT devices to commercial customers.
After a disappointing year for public sector sales in 2013, the company in 2014 announced that its GovConnection subsidiary has been awarded a new professional services contract by Educational & Institutional Cooperative Service, Inc. (E&I), to provide managed integration and staff augmentation services to all participating E&I member institutions.
Chairman Gallup and Director Hall together control about 62% of PC Connection's shares.