The Amtower Report

(The Amtower Report is an e-journal on the Business-to-Government market featuring the opinions of Mark Amtower, and occasionally reader comments. This newsletter is only sent to those who request it. Sign up for your free subscription at http://www.FederalDirect.net and if you like this newsletter, please pass it along to your colleagues. To unsubscribe, see directions below. The newsletter is posted each Monday at www.FederalDirect.net, and the latest “Off-Center Observations” is on the home page. All back issues available at http://www.federaldirect.net/newsletterarchives.html)

In this issue:
Amtower Off-Center Observations
The Good, The Bad and the Ugly: Dell Government
Events Worth Attending
Amtower on the Radio- WFED

AMTOWER OFF-CENTER OBSERVATIONS

Item: The Women in Technology Leadership Awards honor women who have excelled in their roles as mentors, leaders and role models in the dynamic technology industry. Winners were recognized in the following categories:  Corporate – Deborah Alderson – President, System and Network Solutions Group – SAIC; Entrepreneur – Rose Wang – CEO – Binary Group; Government – Dr. Janice Cuny – Director, Information Technology – National Science Foundation; Rising Star – Jennifer Murrill – Operations Researcher/Cost Analyst – Northrop Grumman Information Technology; WIT Champion – Ardell Fleeson – Managing Director, Business Development – Human Capital Advisors, LLC; President's Award – Charlotte Pelliccia – President – Pelliccia Communications; Founders' Award – Eva Neumann – President – ENC Marketing, Inc.

Item: I did not make it to GovSec after all, so if you went, I would appreciate you sharing your thoughts with me.

Item: If you are in Dallas, listen to my interview on Tuesday, May 29 at 2 PM on KMNY. Let me know how I do.

Item: There are still about 50 copies of Government Marketing Best Practices available; Go to www.governmentexpress.com/ordergmbp.html to get your copy.

Item: Save the date: June19 marks the return of the Government Marketing Forum. Some of you will remember the Forum from 2001-2004 as a monthly breakfast seminar and networking event. The new Forum, like the old, is a collaboration of several companies: Amtower & Co, ConnellyWorks, Federal Business Council, ImmixGroup, Market Connections, Sage Communications and 1105 Government Information Group. These seven companies will act as a steering committee for the Forum, with Larry Rosenfeld and myself acting as co-chairs. The Forum will be designed to be a bi-monthly peer networking event with an educational component. It is geared toward marketing, sales, business development and executives in the business-to-government arena. While all are welcome, early registration is encouraged as our venue will only hold about 100 or so. If we replicate what the earlier Forum provided, there will be both great education and first-class peer networking, plus good food. Beware of cheap imitations – there is nothing else like this! Stay tuned, or shoot me an email ( amtower@erols.com ) to get on the early warning list.

THE GOOD, THE BAD, and THE UGLY: DELL GOVERNMENT

When you think Dell, you think direct. But many of those in the federal market have known for years that Dell has had selected channel and integrator relationships when selling to government. The following is excerpted from an email from Brian Alexander and reprinted with permission of Brian Alexander of Raymond James and Associates.

This article/interview with Michael Dell provides more insight into Dells channel strategy…I am pretty surprised to see them quote a $4 billion # for how much biz they do thru channel currently although I am not surprised the volume is significant as most channel warehouses we have visited contain a lot of Dell product.

We continue to believe that a more expansive channel strategy (particularly in retail and international markets), additional use of ODMs, increasing mix of non-PC sales and growing relationship with AMD will serve as margin catalysts over the next several quarters that should ultimately restore PC operating margins to 5.0% to 5.5% or better. We estimate that PC (desktop and notebook) operating margins are currently running closer to 4% while HP is already approaching 5% (with consumer PC margins over 6% versus Dell consumer at ~ 2%). Assuming Dell achieves a 5.5% op margin on PCs and 10% on everything else (servers, storage, services, software/peripherals), then blended operating margins would approach 7.5% (7.2% including option expense) and EPS would approximate $1.75.  We believe a high teens P/E is appropriate which would put the stock in the low to mid $30s.

We have heard rumblings from smaller resellers that are consistent with this article, in that Dell is reaching out more. In fact, Dell was at a solution provider conference we attended a few months ago. However, we have not heard from larger direct marketers like CDW and Insight that Dell is attempting to engage with them. We believe it is unlikely that Dell will engage with two-step distributors like Ingram Micro and Tech Data, but rather work with resellers directly (to avoid creating channel inventory which would eat into its cost advantage).

So, is this good for the channel? Certainly shifting more revenue from direct sales to the channel is a good thing, but to the extent it cannibalizes existing revenue at lower margins, its clearly a detriment. We believe that most sophisticated resellers have tools that allow them to monitor profitability by vendor by category, so we doubt that these companies would carry Dell product if it didn’t meet their financial objectives (at least initially). The risk is that Dell changes the game down the road after improving its share position. However, in a world that is becoming increasingly vendor agnostic due to lack of product differentiation and increased commoditization and where the brand equity is shifting more to the solution provider, this would be challenging in our view.

Full article at  http://www.crn.com/it-channel/199600505

EVENTS WORTH ATTENDING

Beware of the SCHLOCK EVENT PRODUCERS, producing minimal value events that eat your money with no significant return! The events listed below are among those I think are worth your time, money and effort. Just because an event is not listed below does not imply it is not worth attending. If you want my opinion on a specific event or producer, call me. This topic is addressed more thoroughly in the members section at www.GovernmentMarketingBestPractices.com.

May 23 A Tribute & Roast Honoring  John Sanders, 6:00- 10:00 PM, Capital Hilton http://www.dctechcouncil.org   Sponsorships are available.

June 3-5, 2007, ACT Management of Change Conference, Richmond, Virginia.  THIS WILL SELL OUT FAST – REGISTER NOW! www.actgov.org

June 6, 2007: VMWare SYMPOSIA 2007 Ronald Reagan Center.: http://info.vmware.com/content/Sym?&Src=web_homepage

June 11-15, FBI Global Initiative Conference (on Nuclear Terrorism), Miami http://www.fbcinc.com/event.aspx?eventid=Q6UJ9A00DB3X

June 19, Government Marketing Forum, Tower Club, Vienna VA details TBA

June 21, 2007, Government Women at the Helm, 6 - 830 PM  McLean Hilton, McLean, VA. Speakers: Linda Cureton, Chief Information Officer, NASA Goddard; Deidre Lee, Director, Office of Management, FEMA; Lisa Schlosser, Chief Information Officer, HUD; Kathleen Turco, Chief Financial Officer, GSA;  Moderator: Anne Altman, Managing Director, US Federal, IBM Corporation (invited) www.womenintechnology.org

June 25-28, 2007, National Veteran Small Business Conference & Expo, Las Vegas www.Nationalveteransconference.com

June 26-28, Department of Energy 8^th Annual Small Business Conference,  Washington Hilton, www.smallbusiness-outreach.doe.gov

Nov 6, 2007 – The SIXTH ANNUAL AMTOWER SUMMIT ON SELLING PRODUCTS to the GOVERNMENT, BWI Airport Hilton. Save the date – details to follow at www.FederalDirect.net/2007summit.html

AMTOWER ON THE RADIO - WFED

Amtower Off-Center airs Friday at 2:05 PM on WFED 1050 AM in Washington, DC and is simulcast on  www.FederalNewsRadio.com.

Upcoming guests:  May 25: B2G Marketing – Mary English (MCH), Lisa Dezzutti  (Market Connections), Fred Diamond (Diamond Marketing), Larry Rosenfeld (Sage Communications). ….Stay tuned!

*** As always, your comments, questions and suggestions are welcome.

Thanks
Mark Amtower

The Amtower Report is published by Amtower & Company, and is written for companies targeting the government marketplace. The opinions expressed are those of Mark Amtower unless otherwise noted. Contact us at Amtower & Company, PO Box 314, Highland, MD 20777-0314 (301-924-0058). This material is copyrighted and may not be duplicated, reprinted or otherwise replicated without written permission of the publisher. Email subscriptions are free by request: sign up at www.FederalDirect.net