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Sat 6 Mar 2004 04:00 AM

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SMB faces vendor backlash

Major relationships under threat in the wake of allegations from US president concerning distributor’s role in the international smuggling of nuclear technology

SMB Group has been dropped as Samsung’s UAE distributor following accusations by US president George Bush that the local firm was a front for the distribution of nuclear technology to countries such as Libya, Iran and North Korea.

Since Bush made the accusations on February 11th, SMB has so far declined to comment despite repeated requests. Other vendors using SMB as a distribution partner are also now considering alternative options. Samsung has appointed Tech Data to take over SMB’s distribution role in the UAE market.

“By appointing Tech Data as our new distributor, all our earlier agreements with SMB have become null and void,” explains K.S. Vasudevan, senior manager digital IT division, Samsung Gulf Electronics. “Our relationship has always remained purely business-centric with all our partners. It was our corporate decision to disengage from companies that are mired in controversies.”

PDA manufacturer palmOne is one of several vendors assessing the future of distribution deals with SMB. It issued the following statement to Channel Middle East: "SMB has been one of palmOne’s distributors in Dubai for a number of years. We were extremely concerned when we learned that the company was implicated by President Bush, and have suspended trading with SMB until we have concrete confirmation that neither the company nor any of its directors are involved. palmOne had no previous knowledge about these allegations."

Fujitsu Siemens Computers has also revealed that it is "reviewing the situation" regarding its distribution agreement with SMB.

Several of the vendors assessing the future of their relationship with SMB have referred the decision back to regional or even global headquarters. They also reveal that rival distributors have been queuing up to make contact with them wanting to present themselves as candidates ready to take on SMB’s role.

The man at the centre of Bush's allegations is BSA Tahir, whom he accused of being the smuggling network's “chief financial officer and money launderer”. Indian born Tahir set up SMB after arriving in the Gulf during the 1980s. While BSA Tahir has explained his role in the distribution of nuclear technology equipment to Malaysian authorities, the precise role of SMB in facilitating these activites has not emerged.

So far, SMB has escaped further investigation from authorities in Dubai. Some insiders claim that BSA Tahir's involvement was the actions of a lone individual with SMB being implicated by pure association. Whatever the extent of SMB's involvement, vendors feel the need to distance themselves from the company in order to protect their brand reputation.

“Samsung is an extremely strong brand with strong commitment to the region,” adds Vasudevan. “A major situation of this kind has nothing to do with our image. In fact, our commitment gets stronger through our decision to disengage from companies with controversial records.”

One vendor expressed its admiration for SMB's skills as a distributor during many years of partnership. Nevertheless, it too is considering terminating its contract with SMB because of the bad publicity surrounding the distributor. The future for SMB remains unclear and the company has so far issued no official comment regarding the allegations made against it, or its immediate plans to cope with the loss of major vendor partners.

While the impact on SMB's relationships with vendor partners is starting to become apparent, the reaction of its customers will be even more important. Some will feel the need to distance themselves from SMB and rival suppliers will be waiting to snap up these new clients. SMB's company strap line is “endless possibilities”. Not all of them may be positive.

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