CHS Electronics

» see chselectronics.com as it lived, on the wayback machine

~ the obit ~

Buy a PC in the 1990s and you had an opinion about the brand on the case and none whatsoever about whoever got it into the shop. Between a vendor and the counter you handed your money across sits an entire invisible layer, and a very large part of that layer in Europe belonged, briefly, to a Miami company called CHS Electronics. I spent years listing my hardware in forum signatures without once wondering who had moved any of it.

Its own 1998 annual report carries the numbers, and they do most of the work. Net sales of 8,545,773 thousand dollars, which is to say about 8.5 billion, up from 4.76 billion the year before. About 6,800 full-time staff, of whom only around 500 were in the United States. Forty-six countries. It described itself as the third-largest distributor of microcomputer products in the world, and as the largest of all in Western Europe. Around 80 percent of what it sold in 1998 came from twenty vendors, with Hewlett-Packard alone at 16 percent of net sales and Microsoft and IBM at 10 percent each.

The logo it used carried a slogan underneath: excellence in distribution. It is still readable on the wordmark file today, which has outlasted every subsidiary the company ever bought.

~ the rap sheet ~

~ the roll-up ~

CHS was founded in 1994 and assembled rather than grown. Claudio Osorio bought distributors, mostly European and Latin American ones, and bolted them on: the Merisel entities in 1996, Karma in 1997, then a run in 1998 that the annual report's own text puts at sixteen companies while the table beneath it lists seventeen. Metrologie, SiS Distributors, Aptec, Intcomex, Brightstar and Merisel Russia are in that year's list.

This is a known shape and it ends a known way. Distribution runs on thin margins and large working capital, so a company that buys its way to scale is carrying both the debt from the purchases and the float of the goods. With Hewlett-Packard alone accounting for 16 percent of what it sold, the people whose goodwill it depended on were a very short list.

~ the rebates ~

The 1998 annual report contains the admission. Vendor rebates had been overstated in the second quarter of that year and in the two that followed, and some of the fourth-quarter rebates had no valid documentation behind them. The overstated amounts were reversed and two quarters were restated. The senior executive responsible for European operations resigned.

After that it came apart quickly. By the third quarter of 1999 the company reported a net loss of 225.3 million dollars against a 6.6 million dollar profit a year earlier, with 170.4 million of that in charges for offloading subsidiaries or putting them into receivership. Eight subsidiaries went back to the people CHS had bought them from, which cut what it owed those sellers by 214 million dollars. In December 1999 it agreed to hand most of what remained in Europe to a management group led by its own chief operating officer.

~ the day it filed ~

On 4 April 2000 CHS Electronics filed a voluntary Chapter 11 petition in the United States Bankruptcy Court for the Southern District of Florida, case number 00-12731. No trustee was appointed and the company continued as debtor in possession. Its plan of reorganization proposed selling the European assets to Europa IT ApS, a Danish corporation, under a letter agreement dated 17 March 2000, which means the buyer had been lined up more than two weeks before the petition went in.

Several accounts put the filing in February 2000. The filing itself says 4 April, under the heading for bankruptcy or receivership, signed by an acting chief financial officer. Four years to go from a Florida incorporation to 8.5 billion dollars of annual sales, and another fifteen months to go from there to a case number in Miami.

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