PLAINFIELD, Ind.-Brightpoint Inc. handled roughly 42 million mobile phones last year and may handle 60 million or more this year. But whatever you do, don’t call the company a distributor.
“If anything, we are a customized logistics company,” Senior Vice President Anurag Gupta protested at the company’s Plainfield, Ind., headquarters last week. “We’ve moved up the food chain, but a lot of people still think `distribution.’ “
Of course, Brightpoint’s enormous distribution business is the company’s bread and butter. The $2.1 billion company ships thousands of orders a day and has 22 worldwide locations.
But the umbrella term “logistics services”-which include product customization, packaging and software provisioning-accounted for nearly 80 percent of the devices handled by Brightpoint in the second quarter. That percentage, which has climbed steadily since early 2004, likely will continue to increase early next year thanks to a new contract with T-Mobile USA Inc. Brightpoint is building a warehouse in Louisville, Ky., and plans to begin customizing phones for the nation’s fourth-largest carrier beginning in the first quarter of 2007.
The company also serves as kind of proxy for operator customers: subscribers who call their carrier wanting a new phone may end up placing an order with a Brightpoint representative. And it provides automated order fulfillment for carriers’ Web sites, shipping single customer orders that appear to come directly from the wireless service provider. What’s more, the firm’s standing as a master agent allows it to pocket a commission from the network operator for every handset it activates on behalf of a customer or that is activated through one of the independent dealers it services.
While the company looks to build on its foothold in the rapidly expanding logistics market, though, it has set its sights on the mobile enterprise market. Brightpoint last year launched its Advanced Wireless Services subsidiary, which works with value-added resellers and system integrators to offer content and applications, converged devices and high-speed wireless solutions to businesses. Brightpoint plans to serve as a distributor for Skype Ltd., delivering hardware from manufacturers to resellers, and will sell and promote the company’s Internet-based voice products to companies with Wi-Fi hot spots. Brightpoint had already inked a deal to serve as a master agent for Vonage Holding Corp., delivering the VoIP company’s wares to its network of retailers.
The idea, according to Chief Executive Officer Robert Laikin, is to grab a piece of mobile data revenues by leveraging its position as a distributor, logistics provider and liaison for carriers and mobile virtual network operators. Brightpoint has invested more than $1 million a quarter over the last few years to build its AWS business, Laikin said, and it is looking to acquire software developers that specialize in device management services in an effort to round out its offerings.
One potential target for acquisition is Perlego Systems Inc. The Gig Harbor, Wash.-based developer offers hosted solutions for cross-platform mobile device management, allowing customers to deliver content, update software and back up data over the air. Earlier this year, Brightpoint struck a deal to include Perlego’s technology as a component of its AWS offering.
While Brightpoint isn’t likely to reap the rewards from such efforts for years, Brightpoint’s founder drew parallels to the company’s early investments in the logistics business.
“Ten years ago, we were investing capital (in logistics services) and seeing little revenue, but we knew we were getting traction with the carriers,” Laikin said. “With AWS, I think it is a strategic area we have to invest in … to differentiate ourselves and to assist carriers in driving their data initiatives.”
Look for Internet voice service providers to play a substantial role in Brightpoint’s efforts, particularly if Laikin’s forecast that carriers will be forced to embrace VoIP is on the mark. Operators will be forced to allow Internet based voice usage, Laikin predicted, as customers begin to demand converged devices and services that support multiple networks. Operators who continue to keep VoIP at arm’s length will lose subscribers, who will take their mobile phone number with them to a new carrier.
“Competition will make one carrier give (support for Internet-based voice), and if one carrier gives it, they’ve all got to give it,” Laikin said. “Number portability changes everything.”
