"We really felt the US dollar variation compared to the real"

The Brazilian unit of Taiwanese network solutions provider D-Link had an intense 2008 businesswise. The unit invested in order to increase customer service capacity, created a new business area to better service the corporate market, launched a web TV channel to showcase products and recorded sales of 1mn units in the retail segment throughout Brazil in the first half of the year.

BNamericas spoke with D-Link Brasil general director Alexandre Wu to find out more about the company's local operations and its strategies to face the global financial crisis.

BNamericas: How has 2008 been for the Brazilian unit of D-Link?

Wu: The main news this year was our increased focus on the newly created area of business solutions, targeted at the corporate market - medium and large companies.

The year for D-Link Brasil was going very well until end-August or the beginning of September, as I believe was the case for most companies. We expected growth of 20-30% this year and by August we had passed that expectation, as has happened in the past few years. D-Link Brasil has always grown above predictions.

In September, October and November, it was a little bit more complicated because of the variation of the US dollar compared to the Brazilian real. The market retracted but we didn't feel much of the retraction. What we really felt was the dollar variation because it can affect the profit margin of a reseller, of a distributor.

BNamericas: Did you revise your plan for 20-30% expected growth for the unit this year?

Wu: D-Link doesn't usually do that kind of revision. With the market now being impacted by the crisis, what we've been doing is adjusting our expenses proportionally to [new] growth expectations. If sales aren't hitting the numbers, then expenses need to be adjusted.

BNamericas: Have you already outlined growth expectations for next year, adjusted to the high US dollar exchange rate?

Wu: We usually start planning our budget in September. [Since September], we've made several revisions because nearly every week there is something new in the market. Sometimes it seems that the world is going to end!

We've made about four adjustments from September until now. During this period, we've been trying to figure out what the new reality of the Brazilian market will be next year because these past three months have been crazy due to US dollar variations. We do have a certain amount of experience living in crisis times, and in December we will perform the last revision for next year's budget. I believe next year may be the first time in Brazil we ever perform a budget and target revision during the year.

BNamericas: How are you getting around the dollar problem? Which strategies are you using besides cutting costs?

Wu: Initially, we kept our prices, in reais, steady because our channels are used to prices that stay more or less at the same level. With the US dollar variation the pricing issue got a little confusing, but in September and October we managed to leave prices as they were, in reais, prior to the crisis.

In those months, one US dollar was equivalent to 2.1 reais, so we absorbed the difference between that and the prior exchange rate [US$1 was previously worth about 1.6 reais]. Recently, the dollar has gone up to around 2.4-2.5 reais. This variation between 2.1 reais to 2.5 reais is at another level and we can no longer afford to maintain the [pre-crisis] prices. Therefore, we had to adjust prices [when this last increase occurred] in November.

BNamericas: What about the 500,000-real investment you made to improve and personalize support for your reseller partners? Did you see positive results?

Wu: We made this investment during the crisis but it was something we had planned last year that was implemented this year. D-Link, during the eight years it has been operating in Brazil, has been [continually] improving its post-sales support services. With the crisis, sales may stagnate a bit, but D-Link Brasil has always had a long term commitment to the Brazilian market.

Even though [the value of] this investment may not be fully evident yet, it will be in the medium term; our clients will see our commitment to improving quality and speed in support and service provisions.

BNamericas: D-Link also launched a web TV channel to showcase products to Brazilian clients. Did that help boost sales?

Wu: It went really well. I don't have the precise figures now but it was a huge success, with many visits to the website, and the feedback we have been receiving from clients is that they really appreciate this initiative, this online product demonstration; [it's] a tool for our clients to be able to get to know our products prior to investing in [the products].

BNamericas: Can you disclose Brazil's percentage in the company's total Latin American revenue? Do you believe this figure will stay the same next year?

Wu: Until last year, Brazil represented about 70% of the company's Latin American revenue, including Mexico. This year, the Brazilian share is expected to be reduced. I don't think there is any other company in the region where Brazil represents 70% of Latin American revenue [with Mexico included]. What happened is that Mexico went through a restructuring and is expected to increase its share in Latin America this year.

There is also Colombia, where the telecoms and broadband market has been growing a lot during the past two years, so D-Link Colombia took advantage of the favorable market conditions. With the growth of the company's business in these two countries, D-Link Brasil is expected to represent about 63-64% of Latin American revenue. In the medium and long terms, our expectation is for Brazil to represent about 50% of the region, which doesn't mean that Brazilian businesses will decrease. It just means that Mexico is a large and important market.

BNamericas: How much is D-Link expected to grow in Mexico and Colombia this year?

Wu: I believe Mexico will grow more than 100% and Colombia, due to the good scenario in the telco segment, will reach nearly 200% growth.

BNamericas: What do you consider to be D-Link Brasil's main challenge and business focus for next year?

Wu: For next year we plan to continue focusing on the business solutions area because it's the division in which we have the greatest challenges in the medium and long term - in the next four years. We have been launching solutions, disseminating [information] to the corporate market so they know what we have.

In the retail sector we started massive operations five years ago and as pioneers took wireless to the Brazilian market, where back then there were nearly no players and there was a lot of hesitation concerning wireless. D-Link and Intel worked together to demystify wireless. Due to that, in the past four years there was a boom in the Brazilian wireless market and all players entered it, increasing competition. D-Link is now looking to continue in this market in a new and distinct way: we will keep our operations innovative in the retail segment.

In the telco sector, we work closely with fixed telephony companies in the broadband segment. With the beginning of 3G technology in Brazil, we expect to see a lot of growth in the mobile segment in the next two years and D-Link will accompany this growth, especially in regards to data - providing access, equipment and solutions for 3G.

BNamericas: Would it be correct to say that the WiMax spectrum auction, whenever it is to take place, would help to boost your business?

Wu: The prices and costs of 3G technology have been falling significantly, considering it just started this year in Brazil. Even so, royalties for 3G licenses are much more expensive than for WiMax. Therefore, when WiMax gets deployed in Brazil, it will be very interesting for us.