Dicker Data shares slump after Cisco cancels New Zealand partnership

Dicker Data's shares have slumped in the wake of Cisco's decision to end its partnership with the distributor in New Zealand.

The distributor's shares, which trade on the ASX, fell more than 20 cents from $2.67 prior to the announcement yesterday, to $2.44 at the opening of trading. Shares have since rallied back to $2.53 at the time of writing.

Cisco said it was ending its distribution agreements with both Dicker Data and Ingram Micro New Zealand, opting for a single distie model with Westcon-Comstor. A Cisco spokesperson said the decision came after a six-month internal review in order to optimise its channel and focus more on cloud, security, software and IoT.

"I can’t overstate and reiterate enough how much Dicker Data and Ingram Micro New Zealand have been exceptional distribution partners and that there were no systemic failures that led to this determination," the spokesperson said.

"Cisco has a great relationship with both Dicker Data and with Ingram Micro. This was about changing how we go-to-market, aligning with our customer needs and allowing for future growth."

Dicker Data said in a statement that its Cisco agreement in Australia would not be affected. "It's very disappointing, but we will respond aggressively, like we always do," chief executive David Dicker said.

The distie said it would sell down existing Cisco inventory and work to transition partners in the coming months.

Dicker Data inherited its sizeable Cisco business through the 2014 acquisition of Express Data, which accounted for nearly 50 percent of its turnover before it was acquired. Dicker Data last broke out its Cisco sales numbers in its half-year report in August 2015, reporting sales of $152.3 million for the six-month period.

Problems with the Cisco business in New Zealand were hinted at in Dicker Data's financial results for 2016, when the distie said its largest Cisco partner was purchasing inventory directly from the vendor, which negatively impacted the volumes and timing of related products in the channel.