APC merger joins rivals, leaves product questions
- 02 November, 2006 17:53
The planned merger of American Power Conversion Corp., and French-based Schneider Electric SA -- announced earlier this week -- would combine two companies that have been competitors for data center backup power business. But it would also leave in its wake uncertainty about the companies' future product line directions.
The merger isn't expect to close until early next year.
Schneider plans to acquire West Kingston, R.I.-based APC for US$6.1 billion. The two firms, through Schneider subsidiary MGE UPS Systems, have competed in the uninterruptible power supply (UPS) market. APC makes a number of other data center products, such as cooling systems.
It's too soon to say whether customers of either firm can expect product line consolidations as a result of the merger, according to Aaron Davis, APC's vice president of marketing and communications. "One of the goals of the merger is to bring two companies together whose resources and expertise will enable them to be focused on delivering comprehensive customer solutions in critical power and energy management."
Davis said APC is also reaching out to its customers, telling them that it will continue to be well suited to meet their needs and that "one of our priorities is to make our transition to new ownership smooth and seamless for them."
One APC user, Seth Mitchell, infrastructure team leader at Slumberland Inc. in Little Canada, Minn., uses APC products and has experience with MGE's offerings. He said the merger will be a difficult fit.
"I don't see a lot of positives in the short term," said Mitchell, whose company operates 100 furniture stores in 10 states. "It might look nice on a balance sheet, but getting two fierce competitors to integrate their highly contrasted ideologies to produce a cohesive set of products and services seems like a big task."
Vishal Sapru, an analyst at Frost & Sullivan Ltd. in San Jose, who focuses on the backup power market, said the merger will benefit APC customers by giving them better access to Schneider's product line.
The merger will give Schneider the largest market share in the power quality market. Its chief rivals include Cleveland-based Eaton Corp. and Columbus, Ohio-based Liebert Corp., said Sapru. He expects the competition to increase as rivals respond to the merger.
In North America, APC has about 28 percent of the market for backup power supply, making it the largest in the region. Eaton has 14 percent of the market for backup power in North America, while Liebert has about 12 percent, and MGE -- which is stronger in Europe than in North America -- has just 2 percent to 3 percent, said Sapru. The global market for backup power is worth about $5.7 billion annually, and $2.4 billion in the U.S.