SCKT... Distributor Inventory: Good & Bad
This post focuses on SCKT's Somo units (and not worrying about the scanner side of the company):
Socket sells their Somos through 3 different channels:
1. Direct partners who use the Somo unit in specialized retail and medical devices.
2. Direct large customers (ex. large hospital chains, nursing home chains....)
3. International and Domestic Distributors (who get the units for a certain price, add their profit on and then drop ship them for online retailers who also add a small profit, but also then don't have to carry inventory).
Imo, #1 and #2 have make up the "meat and potato" of the company's Somo revenue. A growing segment that will continue to expand as more and more units are used in medical and retail/hospitality situations.
#3 is the desert for us. Small companies already buy through the online retailers/distributor channel but we need the HUGE former HP Ipaq crowd to realize the SOMO replacement exists and start to buy. A former market of tens/hundreds of thousands of units would be nice to draw customers from.
I would hazard a guess that in 3rd Q of the 5000 units shipped (another 1000 late but we won't count those) that 3500-4000 were from channels #1 and #2 and 1000-1500 from #3 (probably on the low number).
When I first started tracking domestic online retailers to follow the #3 channel, I was excited at the numbers. I was WRONG! I have since learned I was very redundant in my counting. I now have been able to figure out the inventory at distributors instead (ex. Ingram Micro, ScanSource, D&H, Bluestar....). I apologize for any posts that were misleading.
What I now know: During the last cc call, Kevin said they had made NO EFFORT to go after former Hp customers yet. That there effort was going towards increasing inventory at distributors first to make sure they are a "stable" supplier to new customers. From my "corrected analysis", the data I collected in early October shows that SCKT's inventory levels at distributors SUCKED!! Sales aren't that impressive either through this #3 channel (it's why I say it probably accounted for less than 25% of 3rd Qs Somo revenue). Two or three large orders could wipe it all out among ALL the distributors. Ingram Micro, Socket's #1 seller, didn't even have any Somo 650EB-E units in stock there for awhile. (note: I think Ingram Micro and the other distributors do very good business for SCKT for their scanner side. I see nice churn of numbers and restocking there from early Oct and continuing today).
Since then: The company said on the CC Call that an effort to increase inventory was picking up. I have to admit that is what I've seen. EX. the Somo 650EB-E, the most popular unit the company sells, has increased inventory by around 150 units/week above and beyond sales. Total inventory has gone from around 200 units in early October to approaching 1000 now (spread among all distributors). The numbers have been increasing more and more in the last two weeks primarily. There are incoming stock numbers expected to be delivered to the distributors that will probably double that in the next 30 days. Similar growth, but smaller numbers, for the other units that are less popular.
Conclusion: Socket was NOT ready to go after the HP Ipaq market at the beginning of the quarter. I still don't think they are as of today. They need to get inventory up about double what it is today imo to make sure they don't run out of product if sales are stronger than expected (ex. I think they need 1500+ units of the 650EB-E ready and available to ship already at the distributors). They don't need to make new customers wait---it's whats F'd them up in the past. It appears they are getting there though.
It means Socket is able to now supply channels #1 and #2 and build inventory in #3, especially as November has started. They key for success will be if they can start to eventually get inventory up more and then sell a decent number of units through channel #3 to the Ipaq crowd. Perhaps in December this avenue will start to play out.
Still a very risky play here. This is going to require patience for the reward.
AI
