1. Distribution Outlook The Impact on Sales of Computer Products Prepared for the Global Technology Distribution Council

2. Distribution Outlook: Computer Products Key Findings and Market Summary Computer product purchases from distributors by North American resellers grew an estimated 11 percent in 2000, compared to 9 percent overall growth Computer product purchases from distributors by North American resellers grew an estimated 11 percent in 2000, compared to 9 percent overall growth These purchases from distributors represent 60 percent of all computer products bought by resellers These purchases from distributors represent 60 percent of all computer products bought by resellers Distributors extended an estimated $32.7 billion in credit to resellers in 2000 Distributors extended an estimated $32.7 billion in credit to resellers in 2000 Forecasts for 2001 show little change in product purchasing sources Forecasts for 2001 show little change in product purchasing sources E-commerce services provided by distributors are in demand E-commerce services provided by distributors are in demand

3. Distribution Outlook: Computer Products Research Methodology Projections based on purchase source data from phone interviews with 4,000 North American reseller organizations, July and August 2000. Data reflects +/- 1.6 percent margin of error. Projections based on purchase source data from phone interviews with 4,000 North American reseller organizations, July and August 2000. Data reflects +/- 1.6 percent margin of error. Product purchasing volumes based on phone survey of 300 reseller organizations and 100 ASP and ISP organizations, August and September 2000. Combined data reflects +/- 5 percent margin of error. Product purchasing volumes based on phone survey of 300 reseller organizations and 100 ASP and ISP organizations, August and September 2000. Combined data reflects +/- 5 percent margin of error. Qualitative interviews conducted with indirect sales executives at major computer product manufacturers Qualitative interviews conducted with indirect sales executives at major computer product manufacturers Qualitative interviews conducted with executives at major computer product distribution firms Qualitative interviews conducted with executives at major computer product distribution firms

4. Distribution Outlook: Computer Products Purchases by Resellers Made Through First-Tier Distributors 11% Increase

5. Distribution Outlook: Computer Products Credit Extended To Resellers In this $77.3 billion market, distributors will extend $32.7 billion to second-tier resellers in credit in 2000. This represents 42.3 % of all purchases. all purchases.

6. Distribution Outlook: Computer Products Second-Tier Purchasing Sources In the past 12 months, what percent of your company’s purchases were actually made and ordered from the following sources? Purchasing SourceResellersISPs/ASPs Distributor sales rep48.5%22.8% Distributor Internet site19.8%10.4% EDI/XML-based distributor order2.3%4.8% Direct through manufacturer rep11.6%26.7% Manufacturer Internet site4.0%13.3% Online retailer3.1%8.2% Local reseller10.7%13.6% Reseller base: 300 organizations (September 2000) ISP/ASP base: 100 organizations (September 2000)

7. Distribution Outlook: Computer Products Reseller base: 300 organizations (September 2000) ISP/ASP base: 98 organizations (September 2000) Primary Source For Pre-sales Product Information Considering the following sources, which one of these is your primary source for pre-sales product information in the purchasing process? Information SourceResellersISPs/ASPs Distributor telesales rep27.7%13.3% Distributor Internet site20.7%5.1% Product manufacturer sales rep16.7%31.6% Product manufacturer Internet site28.3%40.8% Online retailer/catalog Internet site6.7%9.2%

8. Distribution Outlook: Computer Products Primary Customer Base For Resellers and ISPs/ASPs Which of the following size businesses reflects your company’s primary customer base in terms of largest percentage of sales in last 12 months? Number of Employees at CustomerResellersISPs/ASPs One to 2031.4%26.5% 21 to 10027.8%25% 101 to 50016.1%22.1% More than 50024.7%26.5% Reseller base: 299 organizations (September 2000) ISP/ASP base: 68 organizations (September 2000)

9. Distribution Outlook: Computer Products Product Type Purchases Through Distributor Telesales What percent of the total amount your company spends on these products is spent specifically on purchases transacted through a distributor telesales rep? Product TypeResellersISPs/ASPs Hardware systems 21.7%22.7% Network hardware15.0%16.6% Components13.5%13.0% Storage products13.2%13.1% Printers and monitors13.5%11.7% Application software12.1%9.7% Systems software11.1%13.2% Reseller base: varies (September 2000) ISP/ASP base: varies (September 2000)

10. Distribution Outlook: Computer Products Percent of Sales Through Primary Distributor What percent of your total computer product purchases from all distributors was made from your primary distributor... In other words, the distributor that accounted for the most business with your company? Reseller base: 295 organizations (September 2000) ISP/ASP base: 74 organizations (September 2000)

11. Distribution Outlook: Computer Products Reseller base: 290 organizations (September 2000) ISP/ASP base: 72 organizations (September 2000) Credit Terms Used By Second-Tier Organizations What credit terms are used by your company to purchase computer products from distributors? Type of Credit TermResellersISPs/ASPs Net 30 Days73.1%73.6% Credit Card34.5%36.1% Cash on Delivery29.3%22.2% Net 15 Days14.1%9.7% Net 45 Days10.3%9.7% Net 60 Days or More10.3%13.9% End Customer-Based Financing7.9%12.5% Escrow Account3.1%1.4%

12. Distribution Outlook: Computer Products Projected Second-Tier Purchasing Sources In the next 12 months, what percent of your company’s purchases will be made and ordered from the following sources? SourceResellersISPs/ASPs Distributor sales rep43.2%20% Distributor Internet site21.7%12.3% EDI/XML-Based distributor order2.8%5.4% Direct through manufacturer rep12.1%26.2% Manufacturer Internet site5.8%14.9% Online retailer4.2%8.8% Local reseller9.8%12.5% Reseller base: 300 organizations (September 2000) ISP/ASP base: 100 organizations (September 2000)

13. Distribution Outlook: Computer Products Reseller base: 300 organizations (September 2000) ISP/ASP base: 73 organizations (September 2000) Importance Ratings of Pre-Sales Services Provided by Distributors Rate the importance of each factor on a scale of 1 (not important at all) to 5 (most important). Pre-Sales FunctionResellersISPs/ASPs Ability for distributor to provide systems configuration and assembly3.32.9 Availability of marketing and/or sales tools from distributor’s Internet site3.23.0 Credit extended by distributor2.73.4 Pre-sales information2.33.1 Lowest pricing available2.13.1 Relationship/trust w/distributor telesales rep1.93.0

14. Distribution Outlook: Computer Products Reseller base: 300 organizations (September 2000) ISP/ASP base: 73 organizations (September 2000) Importance Ratings of Logistical Support & Services Provided by Distributors Please rate the importance of each factor on a scale of 1 (not important at all) to 5 (most important) Logistical Support and/or ServiceResellersISPs/ASPs Ability of distributor to provide logistics and delivery of products on outsourced basis2.92.9 Post-sale tech support on multiple products2.32.8 One-stop shopping2.13.0 Post-purchase logistical support2.02.8 Ability to determine availability and shipment location of products2.03.1

15. Distribution Outlook: Computer Products Reseller base: 300 organizations (September 2000) ISP/ASP base: 73 organizations (September 2000) Importance Ratings of E-Commerce Services Provided by Distributors Considering the following reasons as to why your company purchases computer products from distributors, please rate the importance of each factor on a scale of 1 (not important at all) to 5 (most important). e-Commerce ServiceResellersISPs/ASPs Ability for Online Invoicing3.52.9 Ability for Distributor to Provide an “Electronic Storefront”3.32.9

16. Distribution Outlook: Computer Products Satisfaction Levels With Pre-Sales Services How would you rate your company’s satisfaction with your primary distributor in the following areas, where 1 is not satisfied at all and 5 is extremely satisfied? Pre-Sales ServiceResellersISPs/ASPs Availability of marketing and/or sales tools from distributor’s internet site3.02.9 Ability for distributor to provide systems configuration & assembly on outsourced basis2.82.9 Navigation, information and ordering functionality on internet site2.73.0 Provides access to necessary credit terms2.33.0 Provides necessary pre-sales technical info2.33.0 Provides access to informed account rep2.22.9 Reseller base: 300 organizations (September 2000) ISP/ASP base: 73 organizations (September 2000)

17. Distribution Outlook: Computer Products Satisfaction Levels With Logistics & Post-Sale Services How would you rate your company’s satisfaction with your primary distributor in the following areas, where 1 is not satisfied at all and 5 is extremely satisfied? Logistic or Post-Sale ServiceResellersISPs/ASPs Ability of distributor to provide logistics and delivery of products on an outsourced basis2.63.0 Post-sale technical support2.42.9 Provides aggregation of multiple products and brands under single order2.13.1 Ability to handle product returns2.02.9 Provides timely information on product pricing, availability and warehouse location1.92.9 Provides timely order confirmation & tracking info1.92.9 Accurate and on-schedule shipments1.82.9 Reseller base: 300 organizations (September 2000) ISP/ASP base: 73 organizations (September 2000)

18. Distribution Outlook: Computer Products Value of Primary Distributor To Overall Business Considering such issues as access to product information, credit, and ordering and shipment of products, please rate the value of your primary distributor to your company’s overall business on a scale of 1, no value, to 5, extremely valuable. Reseller base: 300 organizations (September 2000) ISP/ASP base: 75 organizations (September 2000)

19. Distribution Outlook: Computer Products Core Competencies of Distributors Computer product manufacturers report that the core competencies of their distributors are in the following areas: Inventory management Inventory management Market coverage Market coverage Credit Credit Product fulfillment and delivery logistics Product fulfillment and delivery logistics Order entry Order entry Marketing Marketing Tech Support Tech Support Recruitment and training Recruitment and training Product configuration Product configuration

20. Distribution Outlook: Computer Products Distributor Outlook on Market Dynamics Overall Supply Chain Issues Continued efforts by manufacturers to drive out costs and redundancies from indirect sales channels Continued efforts by manufacturers to drive out costs and redundancies from indirect sales channels Unbundling of distributor services Unbundling of distributor services Time to market pressure from manufacturers Time to market pressure from manufacturers Resolving legacy payment terms for manufacturers versus new payment terms Resolving legacy payment terms for manufacturers versus new payment terms Deployment of e-commerce strategies Deployment of e-commerce strategies

21. Distribution Outlook: Computer Products Dynamics Affecting Second-Tier Customers Regarding all of their second-tier customers, distributors frequently cite the following challenges in meeting customer needs: Tech support Tech support Inventory support Inventory support Credit Credit Utilization of distributor’s outsourcing services Utilization of distributor’s outsourcing services Adoption of e-commerce and supply chain tools Adoption of e-commerce and supply chain tools

22. Distribution Outlook: Computer Products Fee-Based Service Outlook by Distributors Types of fee-based services cited by distributors as revenue sources çDemand generation çEngineering services çConfiguration services çManufacturing and assembly çInternet site development and hosting çFinancial services çTechnical support çCustomer care çOrder management and accounting çContract warehousing çCustomized data reporting çOutsourced tech support çCertification training