W. DONALD (DON) BELL - BELL MICROPRODUCTS - (BELM)
CEO Interview - published 01/09/01

DOCUMENT # LAQ273

W. DONALD (DON) BELL is Chairman, President & CEO of Bell Microproducts, Inc. Mr. Bell has over 30 years experience in the electronics industry. He is recognized as an innovative, professional leader and strategist. His experience includes the establishment of several creative and highly successful marketing programs for electronic products from semiconductors to multi-user computer systems and peripherals. In 1988, Mr. Bell founded Bell Microproducts Inc., a value added distribution company specializing in storage products and solutions, semiconductors, computer products, and other value-added services. Since its founding, Bell Microproducts has grown into a $1 billion-plus, industry-recognized specialist in storage products and is one of the world’s largest storage-centric value-added distributors in the market today. Prior to the establishment of Bell Microproducts, he held key executive positions with Ducommun, Inc., Kierulff Electronics, Texas Instruments, American Microsystems, Inc., Electronic Arrays (NEC), and other electronic companies. Mr. Bell joined Ducommun, Inc. as President and Chief Operating Officer in 1986. He was responsible for five aerospace companies, in addition to the five electronic distribution businesses. In 1980, Mr. Bell served Kierulff Electronics as Executive Vice President and in 1981 was appointed President of the company. He expanded the $100 million company into a $400 million multi-company distributor of electronic components and computer products during his tenure. Mr. Bell is currently a member of the Board of Directors of Sand Hill Capital and the Engineering Leadership Board for the University of Alabama. He has been honored as Distinguished Engineering Fellow by the University of Alabama. Mr. Bell was also inducted into the State of Alabama Engineering Hall of Fame. In addition, he has served on the Board of Control Data Corporation and the San Jose Symphony. Mr. Bell holds a BS degree in Electrical Engineering from the University of Alabama.

Sector: Data Storage

TWST: Let’s start off by giving us a brief overview of Bell Microproducts the company’s history, products, customers, those kinds of things.

Mr. Bell: Bell Microproducts is a 12-year-old specialist in storage components and systems. The company has grown rapidly. Sales in 1999 were slightly in excess of $1 billion and are expected to reach $1.8 billion in 2000, and $2.6 billion to $2.8 billion in 2001. Bell Micro is positioned as a leading supplier of a broad range of storage components necessary to build storage systems. In addition, we have the ability to integrate and supply storage systems on a turnkey basis to our customers. We also sell name brand products such as Storage Tech, ADIC, Compaq and other leading storage product lines. We are growing rapidly, gaining market share in the industry, and are recognized as one of the leaders in the fast-growing storage systems market.

TWST: Will acquisitions continue to play a part in your future?

Mr. Bell: We’ve grown our company geographically through acquisitions over the recent past. We may do that again in the future, but our primary focus will be to build our storage systems infrastructure and capabilities. We recently acquired Rorke Data, a storage systems integrator in Minneapolis and Emmen, Holland. We plan to add other acquisitions to help strengthen our storage infrastructure and technical capability. Certainly the market demand is there, and we have a mission critical program to ensure that our company remains one of the industry’s leading in storage product provider.

TWST: Does the seeming downturn in purchasing PCs affect your company?

Mr. Bell: When the PC market turns down, it affects everybody in the food chain. PCs are a very small part of our business. We have a small computer manufacturing company, Trademark, that we own (it sells about $35 million a year). We do not sell branded PCs so we have not been impacted like many other people who have 30% or 40% of their business in the PC area. But when PCs slow down, it impacts everyone, including the semiconductor industry and other component and peripherals manufacturers. We will focus our efforts on network appliances and other related products, where we are taking an early position in that end of the marketplace.

TWST: What are some of the other trends, developments, and so forth that you anticipate in your marketplace in the future?

Mr. Bell: Two significant trends that we’re positioned to take advantage of are (1) the trend in storage systems toward Network Attached Storage, called NAS, and (2) Storage Area Networks, called SAN. These two market segments are now about 10% of the overall storage market and are expected to grow to about 50% of the market in 2003. We have dedicated a group of people to both NAS and SAN products. We have signed new NAS product lines and are growing very rapidly. In the storage area network business — where there’s much more infrastructure and more of a technical solution — we acquired Rorke Data, a SAN specialist, and have opened a SAN lab to give us the ability to test and assure interoperability for our customers. Bell Micro is building the technical infrastructure to assure that we are well positioned in both of these growth markets. NAS and SAN are the fastest growing markets that we know of in technology today, and we are well positioned in the early stages of these businesses.

TWST: What are the major concerns or risks facing Bell Microproducts today and also in the future? Anything to keep you awake at night about the economy?

Mr. Bell: I think the biggest issue facing the technology markets today is the overall economy and business, and personal spending. And obviously, at this time, there are many questions related to how well the economy is going to perform in 2001. I personally think that the industry will see slow growth going forward, but we will have overall growth as an industry. When we hit slow- downs, the whole challenge is to be positioned in growth markets with momentum. If you are well positioned, with momentum, you can grow at a rapid rate, even in a stagnant marketplace. That is what we plan to do.

TWST: Can you tell us more about Bell’s competitive advantages? What else sets the company apart from your competition?

Mr. Bell: Bell Micro has many competitive advantages. One of our key advantages is that we are the leader in the supply of disk drives throughout the Americas and in the UK. We also are the leader in the supply of fibre channel products. We recently announced a partnership agreement with Brocade, the last remaining leader with whom we did not have a relationship. Sos today anyone building storage systems can buy practically everything they need from Bell Microproducts. We are now adding software and other products to be able to complete the product package. It is a distinct advantage that we feel we have over anyone else. Another advantage is the early positioning we have attained in both NAS and SAN markets, and the product focus that we have gives us the infrastructure to be able to support our customers. With our capabilities today, we not only integrate storage systems, whether it’s our own brand or large brand names, we also do turnkey installations for our customers. That’s a unique advantage; no one else in our business is able to do these things together.

TWST: Any opportunities for improvement within Bell Microproducts? Any areas that could use some strengthening at this point?

Mr. Bell: We intend to strengthen our semiconductor product base, and we think that opportunities will exist in 2001 for that. We would like to sign some new lines and increase our product offering to our customers. The industry has been sold out for about two years and did not need additional distributors. We think that dynamic will be changing going forward, and believe there will be some opportunities for our company. As we continue to implement our game plan, and shift our mix of business, we think we can get a substantial improvement at the bottom line, on a percentage basis, by selling a richer product mix.

TWST: You touched on this, but what specific achievements are believed to characterize the next two to three years as successful for Bell?

Mr. Bell: Our goals are to continue our improvement in profitability as a percentage of sales, to establish ourselves in an even stronger way as the leading supplier of storage systems and services, and to do this on a worldwide basis.

TWST: How do you feel about your current stock price?

Mr. Bell: We believe we have more value than the market is recognizing today. Our market capitalization grew substantially during 2000, but we are still very undervalued when you look at the growth rates of the company, the potential of profitability improvement, and the capabilities that the company has. So even though we received more recognition this year, we’re hoping to be better recognized in 2001.

TWST: Can you give us two or three reasons why long-term investors should buy stock in Bell Microproducts today?

Mr. Bell: We have demonstrated strong, consistent, profitable growth through tough times, and are emerging as a leader in a very strong growth market: storage systems. We are a company that is projected to continue to grow over the next four to five years. Our overall capability, unique positioning, and our past proven ability to execute on our game plan are the key fundamentals of our company.

TWST: Is there anything I’ve overlooked or missed that you’d like to bring up?

Mr. Bell: We are now expanding geographically. In the last two years, we’ve moved into Canada and Latin America, and now we’re the strongest storage distributor in those markets. We recently moved into the UK, and we are the strongest storage distributor in that region. Our division in the UK, Ideal Hardware, was recently named by Computer Reseller News as Storage Distributor of the Year. We will shortly expand into the rest of Europe and plan to open in Spain, Portugal, France, Germany, Belgium, and Scandinavia. So we have an aggressive expansion program underway, and we will make some major moves in the first half of the year to realize our goal of being a worldwide supplier.

TWST: Thank you.

W. DONALD BELL
 Chairman, President & CEO
 Bell Microproducts, Inc.
 1941 Ringwood Ave.
 San Jose, CA 95131
 (408) 451-9400
 (408) 451-1600 - fax
 www.bellmicro.com

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