contents Message from the Chairman... 1 1. Company... 6 1.1 Highlights 6 1.2 Capital and Shareholding Structure 10 1.3 Board of Directors, Auditing Board and Auditing Committee 11 1.4 Organisation Chart 12 1.5 Board of Directors 13 1.6 Historical Background 15 2. Sector of Operation...... 2.1 IT Sector 2.2 Subsegments of the IT Sector 2.3 Growth of the IT Sector 22 22 29 37 3. Subsidiaries... 42 3.1 Datagate Bilgisayar Malzemeleri Tic. A.fi 42 3.2 Neteks letiflim Ürünleri Da t m A.fi. 43 3.3 Neotech Teknolojik Ürünler Da t m A.fi. 44 3.4 Art m Biliflim Çözüm ve Da t m A.fi. 44 3.5 nfin Bilgisayar Ticaret A.fi. 45 3.6 Teklos Teknoloji Lojistik A.fi. 45 4. Operation... 48 4.1 Structure of Product Supply and Distribution 48 4.2 Logistics 49 4.3 Invoicing and Collection 49 4.4 Technical Support and Customer Service 49 4.5 Marketing and Sales 50 5. Corporate Governance Principles Compliance Report... 54 6. Auditing Board s Report...... 62 7. Independent Auditor s Report..... 66 8. Financial Statements and Notes..... 70
Dear Shareholders; Before reviewing our companies activities performed in 2011, and the relevant balance sheet and profit & loss account reflecting the results of these activities, I would like to talk briefly about the latest developments in the global economy and Turkish economy, and the developments of the IT sector. The world faced with many economic and politic changes in 2011. Except the reflection of Arab Spring in the Middle East and North Africa Region, with the increasing financial risks and negative situation becoming in public finance of EU Countries, the world economy achieved growth rate of 4%. Positive improvements regarding work power markets in US economy left worries and suspects behind. Vice versa countries around Turkey, firstly Euro Zone, our country had considerably successful year in both economic and political arena, became the second fastest growing country with 8,5% growth rate after China. Turkey with the achieved growth in the last two years, turned global crises to advantage while the risks increased in the world economy. We estimate our country to grow between 4% and 5% in 2012 although political instability in countries in close regions and nonsolved debt crises firstly Euro Zone and Europe. Current Account Deficit will still continue to be a threat for the economy of our country as used to be during many years besides the effect of money cost of finance regarding the growth depending on external savings. Nevres Erol B LEC K Chairman IT Sector achieved 8,1% growth in 2011 compared to 2010 and reached 5,8 billion USD. While the rate of software reached 13% with increasing R&D activities in 2011, this rate is over 20% in developed countries. Unfortunately, our country should move forward more in software category. Service category progresses in parallel to software in Turkey. While the service portion is over 40% in developed countries, this rate is only 19% in our country. The lever of sector in 2011 has been mobile product as it was in 2010. In the next terms, the demand will continue with increase for ultra mobile computers besides mobile and tablet products. We estimate IT sector to grow 10% and reach 6,3 billion USD business volume in 2012. 1
In 2011, our Company s turnover reached 1,5 billion TRL with growth of 23%, net profit reached 18,4 million TRL with growth of 40% comparing to the previous year. Our investment activities in IT Sector will continue in 2012 as used to be in the last years. We are targeting growth over sector growth in 2012 with adding new products to our portfolio, investments which we will make in service and logistic side. In 2012, as the company management, we will continue our business understanding, which is focused on profitability, making costeffective analyses, aiming at the realization of the sales budget figures, producing sales policies with a target of customer satisfaction using mobile channel sales teams and prioritizing productivity. Under the skin of Turkey s 2023 vision project, bringing up new generation that succeed new applications in science and technology by turning the achieved improvements in society and economy sections to advantage. We will our best for our responsibility in the context of this project because, we know that one of the conditions to develop in economic and society sense is to move forward in informatics and technology. I would like to express my gratitude to all who contributed to our success, to our employees, business partners, suppliers and our shareholders. Yours Faithfully, Erol B LEC K Chairman 2
3 ANNUAL REPORT 2011
1. Company
5 ANNUAL REPORT 2011
1. Company 1.1 Highlights ndeks Bilgisayar Sistemleri Mühendislik Sanayi ve Ticaret A.fi., which was founded in 1989 to operate in the computer field, has became a company distributing about 200 worldwide brands, employing 289 people and cooperating with over 7.500 business partners, holding the leadership position of the sector for a long time. In the Turkey Top 500 ICT Companies Ranking performed every year by Interpro Medya A.fi., our company ranked 7th (seventh) in the general ranking based on turnover achieved in 2010 among the companies including telephone operators and mobile phone sellers. Our company ranked first in the hardware category among the companies including those above. On the other hand, our Company ranked 1st (first) with a sales revenue of USD 813 (Million USD), like the previous years, in the category of companies selling only computers. Further, it ranked first in six IT categories. ndeks acting as a holding company has 6 affiliates and subsidiaries, each of which operates in different fields of technology products. The following companies are included in the consolidated financial statements of ndeks. The product groups of such companies are shown in the following table: Product Groups by Company INDEX PC Notebooks Printers Servers Peripherals Software DATAGATE Microprocessor Hard Disk Main board Display Card Monitor Optical Products Server Products Memory Products Notebooks Desktops Backup Units Network Products Accessories Security Products Network (ModemUSBAdaptor) products Laser Printers NETEKS Corporate Network Systems Network Equipment Structured Cabling Private Exchange Systems Network Security Solutions ADSL and SME Communication Solutions NEOTECH Consumer Electronics Communication Equipment Alternative Electronic Products TEKLOS Logistic and Transportation ARTIM Software Computer Spare Parts Major distributorships undertaken by main product groups are shown below: PC Products APPLE ASUS FSC HP LENOVO LG MSI SONY VAIO TOSHIBA OEM ALPS INTEL KINGSTON LITEON NEC PHILIPS SEAGATE VIEWSONIC WD BELKIN SAMSUNG FSJ Printer & Peripherals APC CANON EPSON HP IBM OKI PANASONIC XEROX Network Products 3COM ALIED TL CHECKP. CISCO HCS HP NEWBRIDGE NORTELL TREND M. PANDUIT AVAYA IBM ISS Software Products IBM LOTUS MICROSOFT NOVELL SYMANTEC TIVOLI Household Electronics AIRTIES APPLE HITACHI LG PANASONIC SAMSUNG SONY VIEWSONIC CANON HTC Memory & Medium Sized Systems HP IBM LACIE SEAGATE WD 6
a) Breakdown of Sales: 64% of the Company s income is derived from the sales of PC and OEM (Original Equipment Manufacturer computer parts). Breakdown of the Company s sales is as follows: Breakdown of Sales on Product Category Based Computer 50,05 % OEM 13,85 % Communication 9,97 % Printer 12,57 % Other 3,68 % Medium Sized Systems 1,79 % Peripherals 2,57 % Household Electronic 0,58 % Software 4,94 b) Major Manufacturers of our Company ndeks Bilgisayar has a wide range of product line, which allows it to reach more number of dealers, with this advantage, to increase its sales above the sector average. Breakdown of the major distributorships undertaken by our Company are shown below: 3 COM CORNING JUNIPER NOVEL TARGUS ACER DELL KINGMAX OKI TIPPING POINT AIR TIES EPSON KINGSTON PANDUIT TOSHIBA AOC FUJITSU SIEMENS LENOVO PANASONIC TREND MICRO APC GENIUS LEXMARK POWERSONIC TRUST APPLE GIGABYTE LG SAMSUNG VERITAS ASUS HCS LINKSYS SAPPHIRE VERITECH AVAYA HOMEND LITE ON SEAGATE VESTEL AVOCENT HP MAXTOR SERVER i SERIES WACOM BELKIN IBM MICROSOFT SERVER p SERIES WESTERN DIGITAL CABINET IMATION MSI SIEMENS XEROX CANON INTEL NEC SONY CHECKPOINT IOMEGA NOKIA SONY VAIO CISCO SYSTEM ISS NORTEL NETWORKS SYMANTEC (*) Trademarks are listed in alphabetic order. c) Changes in the Share Price throughout the Year: NDEKS in ISE: Having held an IPO in June 2004, our company s shares are traded in Istanbul Stock Exchange (ISE) national market under the code of INDES. The ISE100 index opened at 66.363 in 2011, closed at 52.112 on 31.12.2011 with the decrease of 21%. The lowest level was 48.600 on 11.08.2011 and the highest level was 70.366 on 04.05.2011. The TRL/USD exchange rate opened at 1.5450 at the beginning of the year, had some fluctuations during the year and closed the year at 1.8980 USD valued by 23% within the year. The yearend value of 1 share was TRL 2,30, whereas its value was 2,63 at the beginning of the year. According to the closing value on the last transaction day of the year, the value of our Company is TRL 128.800.000. 7
d) Awards achieved & Distributorships Undertaken in 2011 Company Date Description Alk mbusiness Relation 20.01.2011 In parallel to our business plans and targets, Our company started for negotiations of acquiring majority shares of Alk m Bilgisayar Sanayi ve Ticaret A.fi that provides after sales services of IT products. Alk m Bilgisayar was established in 1996. It provides value added service and maintenance of firstly HP and other many brands. This company provides warranty and void of warranty solutions with its service locations in Istanbul, Ankara and zmir. Canon Eurasia Ltd. 25.01.2011 Our subsidiary Neotech Teknolojik Ürünler Da t m A.fi. signed an agreement with Canon Eurasia Ltd to distribute Canon branded cameras & video cameras and accessories in Turkey. Canon that operates in business solutions, consumer products, media and communication, medical systems and industrial products etc was established in 1937. It is net revenue is 3.209 billipon Yen in 2009 as it operates globally. The head office is located in Japan and it has 118.000 employees globally. Our company Neotech aims to increase its sales with cameras & video cameras and accessories in Turkey. Art mbusiness Relation 03.02.2011 In parallel to our business plans and targets, Our company started for negotiations of acquiring majority shares of Art m Biliflim Çözüm ve Da t m A.fi. that provides distribution of value added solutions and supplies spare parts in IT sector. Art m Biliflim was established in 2003 and distributes oracle sun server, database, and storage products, Hewlett Packard, Fujitsu and Dell branded spare parts. In 2010, it achieved revenue of 10,5 million USD with its 24 employees. IBMPrize 04.02.2011 In the meeting (business partners of the year) held on 02.02.2011 and organized by IBM, the year of 2010 was reviewed. Our company has been awarded as the Distributor of 2010. Alk mbusiness Relation 07.02.2011 In parallel to our business plans and targets, our company acquired % 51 of Art m Biliflim Çözüm ve Da t m A.fi. that provides distribution of value added solutions and supplies spare parts in IT sector. For this transaction, 780.000 USD was invested. Art m Biliflim was established in 2003 and distributes oracle sun server, database, and storage products, Hewlett Packard, Fujitsu and Dell branded spare parts. In 2010, it achieved revenue of 10,5 million USD with its 24 employees. 8
Company Date Description HPPrize 28.03.2011 In the meeting organized by Hewlett Packard Turkey in Istanbul, our company has been awarded as having the biggest business volume in PSG (personal systems group) product group in Distributor Category between 4 distributors by considering parameters such as revenue made in this product group, superior logistic services given, creating success in the sales of all HP branded products in Turkey. Interpromedya A.fi. Prize 28.06.2011 ndeks Bilgisayar ranked 7th among the Turkey Top 500 ICT Companies in turnoverbased regarding the year of 2010 general ranking as determined by Interpromedya A.fi. Prize was given to our company on 27.06.2011, Monday evening in stanbul Technical University s Maslak Campus. HTC Corporation Dsitribution 29.06.2011 Our subsidiary Neotech Teknolojik Ürünler Da t m A.fi. signed an agreement with HTC Corporation to distribute HTC branded smart phones, Tablet PC and accessories in Turkey. HTC was established in 1997 in Taiwan. It is one of the fastest growing companies IT sector. HTC Corporation achieved approximately 5 billion USD (144,5 billion Taiwan Dollar) in 2009, 9.6 billion USD (278,8 billion Taiwan Dollar) net sales. The head office of HTC Corporation is located in Taiwan and has 13.000 employees globally. Alk mbusiness Relation 06.07.2011 Our company has been unable to achieve any result for negotiations with Alk m Bilgisayar Sanayi ve Ticaret A.fi. Microsoft Office 365 Distribution 20.12.2011 Our company was appointed as the only distributor of Office 365 products by Microsoft Turkey and Europe together. These products include specifications of e mail, Microsoft Office, combined messaging and file sharing etc. With said product groups, Microsoft office solutions will be open to usage of medium sized firms in easier way. These products covers easy installation, email, calendar, instant messaging, video conference, working on the documents together, word, excel, powerpoint and online products of onenote facilities that without need of help from people specialized in IT. 9
e) Data on Financial Structure: LIQUIDITY RATIOS 31.12.2011 31.12.2010 Current Ratio 1,25 1,24 Liquidity Ratio 1,03 0,93 OPERATING RATIOS (*) 31.12.2011 31.12.2010 Receivables Turnover 78 69 Payables Turnover 90 86 Inventory Turnover 34 37 (*) The figures in quarterly financial accounts have been taken into consideration in the calculation of the averages. PROFITABILITY RATIOS 31.12.2011 31.12.2010 Gross Profit Margin %6,13 %6,08 Operating Profit Margin %3,69 %3,76 Net Profit Margin %1,22 %1,07 Profit Before Tax Margin %1,88 %1,51 FINANCIAL STRUCTURE RATIOS 31.12.2011 31.12.2010 Shareholders' Equity / Total Liabilities & Shareholders' Equity Short Term Liabilities / Total Liabilities & Shareholders' Equity Long Term Liabilities / Total Liabilities & Shareholders' Equity Financial Debts / Total Liabilities %22 %76 %2 %9 %22 %76 %2 %5 1.2 Capital and Shareholding Structure As of 31.12.2011, the shareholding structure of our Company is as follows: Shareholder's Name Country Shares % Number of Shares Amount of Shares Nevres Erol Bilecik Turkey %33,77 18.909.441 18.909.441 Ayfle nci Bilecik Turkey %2,37 1.325.558 1.325.558 Pouliadis and Associates S.A.(*) Greece %35,56 19.911.119 19.911.119 Public Turkey %28,30 15.851.986 15.851.986 Other Turkey %0,00 1.896 1.896 TOTAL 56.000.000 56.000.000 (*) Voting rights of the shares of Pouliadis and Associates S.A. is given to 5 Greek banks. 10
Capital Increase throughout the Year: The upper limit of authorized capital of our Company was determined as TRL 75.000.000 and its share capital issued as of 31.12.2009 is TRL 56.000.000. Covering the all maximum authorized capital, i.e. TRL 75.000.000, from the profit of 2006, an application is made to Capital Markets Board (CBM) of Turkey for issuing shares with nominal value of TRL 1.000.000 for the capital increase from TRL 55.000.000 to TRL 56.000.000 and the application was approved with the resolution of CBM with no. 25/699 of 28.06.2007. The capital increase was registered on 10.07.2007 and announced on the Turkish Trade Register Gazette with no. 6852 of 16 July 2007. Our company s capital of TRL 56.000.000 is composed of Group A registered shares in value of TRL 318,18 and Group B bearer shares TRL 55.999.681,82. Group A shareholders are authorised to determine half plus one of the board members and to receive 5% of the remaining profit after the first issue reserve funds and first dividend. 1.3 Board of Directors, Auditing Board, Auditing Committee and Corporate Governance Committee Board Members In the General Assembly held on 25.05.2009, Members of the Board of Directors were elected for duration of three years, and their duties and powers were determined pursuant to the Company's Articles of Association and the relevant provisions of the Turkish Commercial Code. Resolutions of the General Assembly were published in the Turkish Trade Register Gazette with no. 7336 of 19 June 2009. Name & Surname Title Term of Office Nevres Erol Bilecik Chairman 3 years Salih Bafl Vice Chairman 3 years Atilla Kayal o lu Board Member 3 years Ayfle nci Bilecik Board Member 3 years Halil Duman Board Member 3 years Members of the Auditing Board Name & Surname Title Term of Office Veli Tan Kirtifl Auditor 1 years H. Ça atay Özdo ru Auditor 1 years Members of the Auditing Committee Name & Surname Salih Bafl Ayfle nci Bilecik Title Committee Member Committee Member Corporate Governance Committee Name & Surname Title Salih Bafl Ayfle nci Bilecik Halil Duman Chairman of the Committee Committee Member Committee Member 11
1.4 Organisation Chart: Organisation chart of the company is given below: Erol BİLECİK Chairman of the Board Timur TİRYAKİ Human Resource Coordinator Özen BOZÇAĞA BEZİRCİ Marketing Communication Manager Tayfun YİĞİT Technology Development Manager Naim SARAÇ Internal Audit Manager Orkun DİZDAR Electronic Sales & Marketing Director Atilla KAYALIOĞLU General Manager Business Unit Management Product Management Sales Management Product Management Retail NonRetail Software Electronic Sales MediumSized Systems Ankara İzmir Halil DUMAN Deputy General Manager Accounting Finance Logistics Risk Management Customer Services Import Human Resources 12
1.5. Board of Directors The Board of Directors of the company consists of five members. Curriculum Vitae of the board members are given below. Nevres Erol Bilecik, Chairman: Erol Bilecik was born in 1962 and graduated from Istanbul Technical University, Department of Computer Engineering. Erol Bilecik, who established ndeks A.fi. in 1989, acts as the chairman of the following subsidiaries of Index, besides our company: Despec Bilgisayar Pazarlama ve Ticaret A.fi., Datagate Bilgisayar Malzemeleri Ticaret A.fi., Neteks letiflim Ürünleri Da t m A.fi., Neotech Teknolojik Ürünler Da t m A.fi., Desbil Teknolojik Ürünler Ticaret Afi., Homend Elektrikli Cihazlar San. Ve Ticaret Afi., nfin Bilgisayar Ticaret A.fi. and Teklos Teknoloji Lojistik Hizmetleri Afi. Moreover, between the years 2002 and 2005, he presided TUBISAD (Turkish Informatics Industry Association) established in 1974, the oldest civil society organisation in the ICT sector, members of which are companies realising 95% of the total transaction volume of the Turkish ICT sector. Erol Bilecik is married with two children and speaks English. Salih Bafl, Vice Chairman: Salih Bafl was born in 1965, and graduated from Anadolu University, Department of Business Administration. He has been working for Index Group since 1990. In 2003, while he was acting as the Assistant General Manager Finance & Accounting for ndeks Bilgisayar Sistemleri Mühendislik Sanayi ve Ticaret A.fi., he was appointed as the General Manager and Vice Chairman of the Board of Directors of Datagate Bilgisayar Malzemeleri Ticaret A.fi.. He curren acts as the Deputy Chairman for the companies, ndeks Bilgisayar Sistemleri Mühendislik Sanayi ve Ticaret Afi., Teklos Teknoloji Lojistik Hizmetleri Afi., Homend Elektrikli Cihazlar San. Ve Ticaret Afi., nfin Bilgisayar Ticaret A.fi. and Desbil Teknolojik Ürünler Ticaret A.fi., and as one of the members of the Board of Directors for the companies Despec Bilgisayar Pazarlama ve Ticaret Afi., Neotech Teknolojik Ürünler Da t m A.fi. and Neteks letiflim Ürünleri Da t m A.fi. Salih Bafl is married with one child and speaks English. Atilla Kayal o lu, Board Member: Atilla Kayal o lu was born in 1952, and graduated from Bo aziçi University, Department of Mechanical Engineering in 1974; following that he received a masters degree from Syracuse University, Department of Industrial Engineering. He carried out several duties in IBM Turk between the years 19801999; and in 1999, when he was the Global Services Manager he left IBM Turk and joined Index. Kayal o lu acts as a Board Member and General Manager of ndeks Bilgisayar Sistemleri Mühendislik Sanayi ve Ticaret A.fi.; he also acts as a Board Member of the companies of Neteks letiflim Ürünleri Da t m A.fi., Datagate Bilgisayar Malzemeleri Ticaret Afi., nfin Bilgisayar Ticaret A.fi. and Teklos Teknoloji Lojistik Hizmetleri Afi.. Atilla Kayal o lu is married with two children and speaks English. Ayfle nci Bilecik, Board Member: Ayfle nci Bilecik was born in 1964 and graduated from Istanbul Technical University, Department of Computer Engineering. She also acts as a Board Member of Desbil Teknolojik Ürünler Ticaret A.fi., being a subsidiary of Index. Being one of the founding partners of ndeks Bilgisayar founded in 1989, Ayfle nci Bilecik used to work as an engineer specialized in software in the ICT sector for long years. Ayfle nci Bilecik is married with two children and speaks English. Halil Duman, Board Member: Halil Duman was born in 1965, and graduated from Marmara University, Department of Business Administration. He carried out several duties in Yücelen nflaat A.fi. between the years 1987 and 2000; and in 2000, when he was the Manager of Finance, he left Yücelen nflaat and joined Index as Finance Director. Duman acts as a member of the Board of Directors of ndeks Bilgisayar Sistemleri Mühendislik Sanayi ve Ticaret A.fi., and also acts as a Board Member of Datagate Bilgisayar Malzemeleri Ticaret Afi., Neteks letiflim Ürünleri Da t m Afi., Teklos Teknoloji Lojistik Hizmetleri Afi., Neotech Teknolojik Ürünler Da t m Afi., Despec Bilgisayar Pazarlama ve Ticaret Afi., Desbil Teknolojik Ürünler Ticaret A.fi. Homend Elektrikli Cihazlar San. ve Ticaret Afi., nfin Bilgisayar Ticaret A.fi. ve Alk m Bilgisayar Afi, and acts as Assistant General Manager Finance of ndeks Bilgisayar Sistemleri Mühendislik Sanayi ve Ticaret A.fi. Halil Duman is married with two children. 13
Names and titles of executives are as follows: Board Member General Manager Atilla KAYALIO LU Board Member Dep. General Manager Halil DUMAN Internal Audit Manager Naim SARAÇ Electronic Sales and Marketing Director Orkun D ZDAR Human Resource Director Timur T RYAK Technology Development Manager Tayfun Y T Finance Manager Birgül ÖZTÜRK Accounting Manager Halim ÇA LAYAN Customer Services and Logistics Dept. Manager Çetin EK NC IT Manager Erkan BERBER Import Manager Canan Koç RANA Administrative Affairs Manager Selahattin GÜL Ankara District Manager Özcan AKDEN Z zmir District Manager Osman fiah N Marketing Communication Manager Özen BOZÇA A BEZ RC Group Sales Manager Mahmut ÖLÇER Retail Channel Sales Manager Atilla ALKAfi IBM e server Software Manager lker SALTO LU OEM Sales Manager Elif fien HP Business Unit Manager Ebru KOÇO LU Microsoft IBM and Lenovo Sales Manager Sedat AZ ZO LU Asus, Dell, Toshiba, Canon Business Unit Manager Yeliz ÖZCAN 14
1.6 Historical Background 2011 Foto & Video 2010 2009 2008 2007 787 Million $ Revenue 2006 630 Million $ Revenue 2005 563 Million $ Revenue 2004 431 Million $ Revenue Halka Arz 2003 2002 2001 2000 163 Million $ Revenue 1999 IBM POS 111 Million $ Revenue 1998 1997 59 Million $ Revenue Business Partner Kingston 1996 PC Distribütör AS400 1995 1994 1993 4 Million $ Revenue Consumables 1992 NIXDORF 1991 1990 15
ndeks Bilgisayar Sistemleri Mühendislik Sanayi ve Ticaret A.fi. was founded on 10.07.1989 to operate in the computer sector. The Company was transformed into a joint stock company in April 2000. The headquarters of the Company, in which Greecebased Pouliadis Group participated in August 2000, is in Istanbul. The Company operates in the Information Technologies ( IT ) sector and deals with the purchase, sales, technical and software support of computers, computer supplies and data transmission equipment. The Company made a distributorship agreement with 3M, being an American company operating in Turkey, for 3M magnetic medium products in 1989. The Company increased its market share in the 3M magnetic products market from 1,2% to 55% in one year. It achieved a turnover of 875 thousand USD with only a staff of 6 in 1989. In the next year, in 1990, it made a turnover of 1.380 thousand USD with a staff of 19. It ranked 82nd among the Turkish IT companies in 1990. In 1991 it made a contract with the Italian company named Olivetti to act as the Authorised Seller of Olivetti PC products. In the same year, it increased the number of staff to 36 and made a turnover of 2.188 thousand USD in 1991. It ranked 45th, rising 37 steps in the ranking of the Turkish IT companies. The Company set up Ankara branch as its first branch in 1992 and started more permanent activities in the Central Anatolia Region. In 1992 the number of its staff increased to 49 and its turnover to 3.7 million USD. It ranked 30th, rising 15 steps in the ranking of the Turkish IT companies, in 1992. It climbed to the rank of 20th among the Turkish IT companies with its turnover of 9.2 million USD and staff of 56 in 1993. In 1994, it has become the Turkish Distributor of HP consumables, APC Uninterrupted Power Supplies and Siemens Nixdorf PC products. Then, it became the 19th biggest IT company of the Turkish market. In 1994 it achieved a turnover of 11.3 million USD with its staff of 61. It founded its zmir branch in April 1995 and signed Business Partner contract with IBM in May. Just in the second half of the same year, i.e. at the end of 1995, it was granted IBM PC Business Partner Award by IBM due to its achievements as a business partner. With its significant channel activities in the same year, ndeks won The Most Active Distributor Award of INTERPRO, which is considered valuable by the sector. It achieved a turnover of 15.9 million USD with its staff of 62 in 1995. Thereafter, it has become the 16th biggest IT Company in the sector. In 1996, IBM changed the distribution model in PC sales organization and adopted the distributorship model. Thus, NDEKS has become the first Turkish company that made a distributorship contract with IBM. It made 4.127 units of IBM PC in 8 days in April of the same year, which was first in the market. By the end of year, ndeks reached the turnover of 38.7 million USD with a staff of 70 and ranked 9th by climbing 7 steps more in the ranking of the Turkish IT companies. It was deserved to receive the titrle of The Most Active Computer Company once more in 1996, just like in 1995. In 1997, ndeks has become the 8th biggest IT Company in Turkey, with a turnover of 58.6 million USD and a staff of 75. The Company made a distributorship agreement for Lotus & IBM Software products, thereby starting distribution of software in 1998. In the same year, it made a distributorship agreement with HP A.fi. for distribution of hardware products. In the same year, it made a new agreement with IBM and became the distributor of AS/400, being one of the most important valueadded products of Turkey. Towards the end of that year, ndeks made a distributorship agreement with Kingston. In 1998, the Company won The Most Active IT Company Award again after 1995 and 1996 and became the only IT company that achieved to win the same award third times. In November 1998, the Supplies Department of ndeks Bilgisayar was reorganised as an independent company and became DESPEC Türkiye with a joint investment with Von Dorp Despec Group, which was the Number 1 in its field in Europe. With its turnover of 89.4 million USD with a staff of 131 in 1998, ndeks climbed another 2 steps in the ranking of Turkish IT ranking and became the 6th Biggest Turkish IT Company. In 1999, ndeks made distributorship agreements with many significant products such as Cisco, Microsoft, Xerox, IBM Pos and Escort; and its logistics centre started operations in June of the same year. ndeks Logistics Centre, which is situated on an area of 2,500 sqm and equipped with highly functional technology, was one of the most important investments of ndeks in canal. The Company reached the turnover of 111 million USD with a staff of 155 in 1999. On 12 April 2000, the company transformed from a Limited Liability Company into a Joint Stock Company. In August 2000, Pouliadis and Associate Societe Anonyme Industrial and Commercial of High Technology Systems S.A. ('Pouliadis S.A.') acquired 50% of NDEKS Bilgisayar which thereby became a company with foreign shareholder. In the same year, ndeks made an agreement for distributorship of Epson products and added Epson products to its increasingly growing range of products. ndeks Bilgisayar achieved a turnover of 163 million USD by the end of 2000. 16
In 2001, the Company made a distributorship agreement with COMPAQ. With this agreement, NDEKS blazed a trail being the only distributor dealing with IBM, HP and COMPAQ PC products. In the same year, ndeks also made distributorship agreements for Novel, Sony and Microsoft OEM products. The Company continued its investments in spite of the economic crisis in 2001 and in March of the same year, it acquired 50,5% of Datagate Bilgisayar Malzemeleri Ticaret Afi. (DATAGATE), which is a leading company in Computer parts/oem sector, there by boosting the morale of the sector. In the same period, it acquired 70% of Neteks letiflim Ürünleri Da t m A.fi. (NETEKS), which is one of the highly experienced distribution companies in network, and continued its growth in spite of the crisis. In the Turkey Top 500 ICT Companies Ranking performed by Interpro Medya A.fi. in 2001, our company ranked 1st in the category of IT Hardware Incomes, 2nd in the category of Turkish IT Companies and 11th in the general ranging of the ICT Sector. In 2002, Oki printers and Toshiba notebook and server products were included in the ndeks range of products. In July 2002, all companies of the group relocated to its current threestorey building with an indoor area of 10.000 sqm in the address of Cendere Yolu, No: 23 Ka thane. The turnover of the Company in 2002 was 189 million USD. Products with Fujitsu Siemens and Nec brands were added to the product portfolio of the Company in 2003. Further, the share of ndeks in DATAGATE, of which 50,5% shares were acquired by ndeks in 2001, thereby being an affiliate of the Company, was increased to 85%. The consolidated turnover of the Company was realized as 323 million USD as of the end of 2003. 15,34% of the ndeks Bilgisayar shares was offered to public on ISE via a capital increase through rights issue after restricting the execution of preemptive rights of existing shareholders, on 24.06.2004. The Company made distributorship contracts with Kingmax and Asus for memory and barebone products, respectively, in 2004 and started to distribute such products. In the same year, ndeks Bilgisayar A.fi. was awarded ISO 9001:2000 certificate. On 02.02.2005, in accordance with the resolution of the Board of Directors dated 02.02.2005, ndeks acquired 80% of Neotech Teknolojik Ürünler Da t m Anonim fiirketi for wholesale trade of consumer electronics and communication products as a new field of operation of the Company. In March 2005, the Registered Capital System was adopted, and its maximum registered capital was approved as TRL 75.000.000. In May 2005, the issued capital of ndeks was increased from TRL 17.600.000 to 45.000.000. In September 2005, the Company made an exclusive distributorship agreement with TPV Technology Limited, which manufactures 19,5% of the monitors in the global market and has realised a turnover of 4 billion USD in 2004, for distribution of AOC branded LCD, CRT Monitor, Plasma Monitor and LCD TV products in Turkey. According to the Top 500 Turkish ICT Companies report issued by Interpro on 27.05.2005 for 2004, our Company ranked 1st in the categories of Notebooks, Desktop PCs, Print Systems, Servers, Data Backup and Storage Units, Office Software and OEM and 8th in the turnoverbased general ranking of Turkey, in which Turk Telekom ranked 1st. With these results, ndeks Bilgisayar achieved to be the only local computer company in the Top Ten. In February 2006, 30,30% of the shares of the second biggest company of the group and a subsidiary of ndeks Bilgisayar, namely Datagate Bilgisayar Malzemeleri Ticaret A.fi., was offered to public in February 2006. of was offered to public on ISE via a capital increase through rights issue after restricting the execution of preemptive rights of existing shareholders. Began to be traded on ISE on 10.02.2006 Thus, 2 companies of the group have been offered to public and begun to be traded on ISE. Partnership share of ndeks Bilgisayar decreased from 85% to 59,2% with the public offering of Datagate. The issued capital of ndeks Bilgisayar was increased from TRL 45.000.000 to TRL 55.000.000 in May 2006. TRL 8.718.703 out of the amount of increase, i.e. TRL 10.000.000, is covered from the profit of the period of 2005 and the remaining TRL 1.281.297 from extraordinary reserves. ndeks has executed one of the most important and greatest investments in ICT sector by purchasing Karadeniz Orme A.S., which is founded on a 39.761 m2 land and having 18.969 m2 indoor area, in order to be used as a logistics centre. The trade name of Karadeniz Orme AS has been changed into Teklos Teknoloji Lojistik Hizmetler A.fi. and its field of activity has been customized to be able to work on the logistics services. The head office of the company moved to its new location on 26.10.2006. EVOS (Effective Efficient Operational Result Oriented) ERP System developed by ndeks A.fi. in 2006 was started to be used by ndeks Group Companies on 01.01.2007. EVOS Project was developed by the Software Engineers Group of ndeks A.fi. within a period of 9 months. Our Company and its subsidiaries included in the consolidated financial statements made distributorship agreements with Canon for printer, fax and scanner products, with Western Digital Corporation for hard disk products, with Panasonic for consumer electronics, with Viewsonic for monitor products and with Sony Vaio for notebook products. According to the 2005 Turkey Top 500 ICT Companies report issued Interpro In 2006, ndeks Bilgisayar, with its turnover of 758.634 (thousand TRL), again ranked 1st in the category of companies selling only computers, like in 2004. With this result, the Company kept its special place as the only local computer company in the Top Ten. Moreover, it was ranked the biggest company in the category of markets with respect to the incomes from Server, Print Systems, OEM, Operating System, Office Software and ETrade sales. ndeks Bilgisayar and its subsidiaries made distributorship contracts with Philips for monitors and PC peripherals, Asus for notebook products, Apple IMC for Apple brand products, Trend Micro for software products for internet security and viruses, Nokia for Eseries products, LG Electronics for notebook products in 2007. The issued capital of the Company was increased from TRL 55.000.000 to TRL 56.000.000 in July 2007. The amount of increase, i.e. TRL 1.000.000, is covered from the profit of the period of 2006. 17
On 24.07.2007, ndeks Bilgisayar and its subsidiary Datagate Bilgisayar A.fi sold 50% of their shares in Neteks letiflim Ürünleri Da t m A.fi., an affiliate of ndeks Bilgisayar, to Westcon Group Eurepean Operation Limited, one of the leading global companies in its field. Of the 50% shares sold, 26% and 24% were provided by ndeks Bilgisayar Sistemleri Mühendislik Sanayi ve Ticaret A.fi and Datagate Bilgisayar Malzemeleri Ticaret A.fi., respectively. Following such sale, Neteks become a JV of which shares are held by ndeks Bilgisayar A.fi. and Westcon Group on 50%50% basis. It was the first time that with this agreement, Westcon Group made an investment in Turkey under a partnership; until then, it was operating only with its fully owned subsidiaries in 19 countries around the world. According to the 2007 Turkey Top 500 ICT Companies Ranking performed by Interpro Medya A.fi., our company ranked seventh, one step higher than the previous year, in the general ranking based on turnover achieved in 2006 among the companies including telephone operators and mobile phone sellers. On the other hand, it ranked first with its sales income of 901.778 (thousand TRL), like the previous years, in the category of companies selling only computers. Further, it ranked first in nine ICT categories. The categories in which ndeks Bilgisayar ranked first are the Portable computer wholesale trader and distributor, Data backup and storage hardware, Server, Print systems wholesale trader and distributor, Data communication hardware, OEM products, Operating system, Office software wholesale trader and distributor and Etrade. In 2008, ndeks Bilgisayar made a distributorship agreement with LG, which is one of the most valuable brands of the world, for notebooks, consumer products and monitors and with Asustek for Asus branded server products. In the same year, Neotech, being a subsidiary of ndeks Bilgisayar, and Datagate were appointed as the distributors of Wacom and Belkin products, respectively. Our Company ranked sixth, one step higher than the previous year, in the general ranking based on sales made in 2007 among the first 500 ICT companies including telephone operators and mobile phone sellers in Turkey. On the other hand, our Company ranked 1st with a sales revenue of TRL 1.022.919 thousand TRL, like the previous years, in the category of companies selling only computers. Further, it ranked first in eight ICT categories. In 2009, ndeks Bilgisayar made distributorship agreements with Iomega and Dell and a supply contract with Best Buy. The contracts made by Neotech A.fi., a subsidiary of ndeks Bilgisayar, for Apple and Airties products were transferred to ndeks Bilgisayar as a result of the segment adjustments in this year. In the same period, Neteks, a 50% affiliate of ndeks Bilgisayar, made distributorship agreements with Juniper, IBM ISS and Avaya. On the other hand, Datagate A.fi. made a distributorship agreement with Fujitsu Siemens. ndeks Bilgisayar ranked 7th among the Turkey Top 500 ICT Companies with its sales income of 927.893 thousand TRL in the turnoverbased general ranking as determined by Interpromedya A.fi. In the analysis of the general ranking results, ndeks Bilgisayar ranked 1st, as the previous years, among the companies dealing with computer trade only. Further, it ranked first in six ICT categories. Further, Datagate Bilgisayar Malzemeleri Tic. A.fi., which is a 59% subsidiary of ndeks Bilgisayar, ranked first in the category of OEM (computer parts) incomes and Neteks letiflim Da t m Ürünleri A.fi., which is a 50% subsidiary of ndeks Bilgisayar, ranked first in the category of Data Communication Hardware. In 2010, our logistic company called Teklos A.fi. achieved the contract of Turkish Telecom for storage and distribution of the products which will be provided to the customers of Turkish Telecom. ndeks Bilgisayar ranked 7th among the Turkey Top 500 ICT Companies with its sales income of TRL 1.087.422 in the turnoverbased general ranking as determined by Interpromedya A.fi. In the analysis of the general ranking results, ndeks Bilgisayar ranked 1st, as the previous years, among the companies dealing with computer trade only. Further, it ranked first in six different ICT categories. These are Personal computer, Mobile, Printing systems, data back up and storage, monitor, operating systems and B2B ETrade. Further, Datagate Bilgisayar Malzemeleri Tic. A.fi., which is a 59% subsidiary of ndeks Bilgisayar, ranked first in the category of OEM (computer parts) incomes and Neteks letiflim Da t m Ürünleri A.fi., which is a 50% subsidiary of ndeks Bilgisayar, ranked first in the category of Data Communication Hardware. Furthermore, Indeks has started negotiations with Canon Eurasia Ltd for the distribution of cameras, video camcorders products and their accessories in Turkey as Canon is one of the biggest producer of these types of products in the world. Our subsidiary, Neteks A.fi achieved the distributor of the year award organized by Cisco Systems in 2009. Indeks achieved the most efficient business partner award which was organized by Lenovo in China in 2009. In addition, Indeks has been awarded the distributor of the year organized by IBM Turk Ltd in Istanbul. In 2011, in parallel to our business plans and targets, our company acquired %51 of Art m Biliflim Çözüm ve Da t m A.fi. that provides distribution of value added solutions and supplies spare parts in IT sector. For this transaction, 780.000 USD was invested. Our subsidiary Neotech Teknolojik Ürünler Da t m A.fi. signed an agreement with Canon Eurasia Ltd to distribute Canon branded cameras & video cameras and accessories in Turkey. In the meeting (business partners of the year) held on 02.02.2011 and organized by IBM, the year of 2010 was reviewed. Our company has been awarded as the Distributor of 2010. In the meeting organized by Hewlett Packard Turkey in Istanbul, our company has been awarded as having the biggest business volume in PSG (personal systems group) product group in Distributor Category between 4 distributors by considering parameters such as revenue made in this product group, superior logistic services given, creating success in the sales of all HP branded products in Turkey. ndeks Bilgisayar ranked 7th among the Turkey Top 500 ICT Companies in the turnoverbased general ranking as determined by Interpromedya A.fi. Prize was given to our company on 27.06.2011, Monday evening in stanbul Technical University s Maslak Campus. 18
Our subsidiary Neotech Teknolojik Ürünler Da t m A.fi. signed an agreement with HTC Corporation to distribute HTC branded smart phones, Tablet PC and accessories in Turkey. Our company was appointed as the only distributor of Office 365 products by Microsoft Turkey and Europe together. These products include specifications of email, Microsoft Office, combined messaging and file sharing etc. 19
2. Sector of Operation
21 ANNUAL REPORT 2011
2. Sector of Operation 2.1 IT Sector 2.1.1 Turkish IT Sector The usage of computers in Turkey started in the end of the 1980 s. Although there was a very rapid development in the sector between the years of 1990 and 1995, usage of computers were limited to mostly financial sector, governmental units, big businesses and universities. In the second half of the 1990 s, the increase in the usage of computers made the IT sector one of the most rapidly growing sectors in Turkey. According to the data issued by International Data Corporation ( IDC ), the Turkish Information and Communication Technologies ( IT ) sector achieved a compound annual growth rate ( CAGR ) of 20% between 1997 and 2000. In 2000, the Turkish IT sector has reached its greatest business volume thus far with 2,3 billion USD, whereas that figure reduced to 1,2 billion USD with 49% recession in 2001 because of the economical crisis that was encountered in the end of 2000 and the postponement of the demand of IT investments by public and private sectors. The figures achieved in 2000 were again caught only in 2004, with a business volume of 2.4 million USD. In other words, it took 4 years to eliminate the effects of the crises. However, one should also consider that one of the causes of the shrinkage of the business volume was the continuously price reduction of products, which is the structural feature of the IT Industry. As a consequence of the realization of the postponed IT investments especially in the private sector in parallel with the improvement in the macroeconomic indicators after 2001, the IT sector continued its growth with a compound annual growth rate ( CAGR ) of 27,9% between 2001 and 2007, which is higher than the growth rates in the period before the crisis. Particularly the increasing usage of internet in the recent years has made a great contribution to this development. However, in despite of the negative pressure of the global economic shrinkage on the consumption tendency and the appreciation of USD against TRL, contrary to the previous crisis periods, the Turkish IT Sector did not shrink, but has reached 4,9 billion USD in 2009. The contribution of tax stimulus packages of the government during 6 months cannot be underestimated for this growth. According to IDC s research, IT market achieved growth from 2009 to 2010 with 10,4%, from 2010 to 2011 with 8,1%. 10000 Turkish IT Market Business Volume (Mio $) 16% 9000 9.124 14% (mn USD) 8000 7000 6000 5000 4000 4.941 5.453 CAGR(1115T): %12 5.897 6.503 7.161 8.038 12% 10% 8% 6% 3000 2000 4% 1000 2% 0 0% 2009 2010 2011 2012F 2013F 2014F 2015F IT Sector Business Volume % Growth Source: IDC 2012 According to the 2012 Turkey IT Expenditures Research conducted by IDC, the Turkish IT market is expected to have a 12% compound annual growth rate (CAGR) in the period between 2011 and 2015, reaching 9,1 billion USD in 2015. IT investment demands deferred in the 2001 crisis period have been started to be realized with the appearance of the increasing stable outlook of the economy and these investment expenditures have been one of the most powerful dynamics of the market in the first 5 years following 2001. 22
New investments that increased after merger and acquisition operations in all sectors, beginning in the finance and telecommunication sectors and spread to other sectors from 2005 on, technology replacement investments, increased IT investment made by the government as part of egovernment projects, increase in the internet usage rates and finally, in the number of the users who follow up the rapidly developing technology became the driving forces of the market between 2005 and 2008. Although the first quarter of 2008 started very favourably, the sector started to lose its strength due to the suit brought to close AKP, a slowdown was experienced in the third quarter when not so many negative results were observed. However, with the last quarter, the sector was affected by the global financial crisis that started at the beginning of October, and thus, the quarter was closed with a doubledigit shrinkage. 2009 was experienced as a year when the wounds of the crisis were bandaged; the effects of the crisis in the first quarter diminished with the effect of the VAT cut applied for 6 months, including the second and third quarters, and positive growth was recorded in the fourth quarter. In 2010, IT sector achieved quite gradual growth after constitutional referendum particularly static summer season. In 2011, particularly in the second half of the year, IT sector was affected negatively by currency fluctuations sourced by debt crisis of European Countries. Turkey has been one of the major developing countries due to the improving general economic conditions, increased per capita income and steps taken for globalization. In addition to highly qualified and cost effective human resources, majority of the young population is contributing to the attractiveness of our country. When the pressure of the diminished consumption tendency on the IT Market due to the crisis in 20082009 decreased, IT sector achieved growth of 8,1% in 2011 comparing to 2010. In 2012, it is expected IT to grow 10,3% and reach 6,3 billion USD business volume. In particular, positive movements are expected especially in the second half of the year. On the other hand, if the share of the endusers in the market is monitored in the period between 1995 and 2009, it would be clearly seen that the market structure has changed considerably. Accordingly, the IT market comprised governmental and public bodies (38%), finance sector companies (30%), private sector companies (20%), individual users (7%) and SMEs (5%) in 1995. However, the shares of government and public sector companies, finance sector companies and private sector companies in the market decreased while those of individual users and SMEs increased in the period between 1995 and 2009. As a result, as of 2011, the Turkish IT market comprises 42% individual users, 18% government and public sector companies, 15% private sector companies, 11% finance sector companies and 14% SMEs. Changes in the Market Share of End Users 2012F 18% 11% 15% 14% 42% 2011 18% 11% 15% 14% 42% 2010 17% 13% 16% 14% 40% 2009 18% 14% 16% 14% 38% 2008 20% 15% 18% 12% 35% 2005 22% 25% 25% 10% 18% 2000 25% 35% 23% 7% 10% 1995 38% 30% 20% 5% 7% 1995 2000 2005 2008 2009 2010 2011 2012F Public Institutions 38% 25% 22% 20% 18% 17% 18% 18% Financial Sector 30% 35% 25% 15% 14% 13% 11% 11% Private Sector (Corporate) 20% 23% 25% 18% 16% 16% 15% 15% SME s 5% 7% 10% 12% 14% 14% 14% 14% Indvidual Users 7% 10% 18% 35% 38% 40% 42% 42% Source: IDC 2012 23
According to the 2009 report of ITU (International Telecommunication Union) on the basis of 2007 data, the rate of PC ownership per household is 70% in the USA, 75% in England, 79% in Germany, 40% in Greece, 53% in Italy, 21% in Brazil and 29% in Turkey. The rate of internet users is 62% in the USA, 67% in England, 71% in Germany, 25% in Greece, 43% in Italy, 15% in Brazil and 19% in Turkey. It is estimated that the rate of the number of PC in operating status to the total population has increased from 8% to 27% in the period between 1995 and end of 2010, and that the rate of the internet users to the total population has increased from 10% to 37% in the same period. This indicates that PC ownership and internet usage rates increased over 3 times in the last 15 years. PC ownership and internet usage rates have increased by 67% and 40%, respectively in the last 5 years. Comparing to the country data published by ITU above, it is clear that Turkey is far below the developed countries with respect to the PC ownership and internet users rate and that there is a long distance to be covered in this field. The PC and internet penetration in Turkey between 2000 and 2013F has developed as shown in the following graphics. Trends in Internet & PC Penetrations 60% 60% 55% 50% 50% 50% 40% 36% 40% 40% 37% 42% 30% 27% 32% 30% 25% 20% 10% 12% 15% 20% 10% 15% 0% 2000 2005 2010 2011 2012F 2013F 0% 2000 2005 2010 2011 2012F 2013F PC Penetration Internet Penetration Source: IDC 2012 According to the results of Households IT Usage Research published by the Turkish Statistical Institute (TÜ K) in April 2010, the PC and internet usage rates of individuals are 40,1% and 45%, respectively. The survey indicates that computer and internet usage rates of people between 16 and 74 ages are 56,1% and 54,9% for men and 36,9% and 35,3% for women, respectively. The age group in which the rate of computer and internet usage is highest is 1624.These rates are higher in men than women in all age groups. By educational level, the population who use the computer and internet most are graduates of first degree and higher education levels. 11,8% of people place order for or purchase goods or service for personal use via internet. According to the report results, PC and internet usage rates have increased by 7% and 8%, respectively in the period between 2010 and 2011. Another interesting feature of the report is that although the computer and internet usage rate of the rural population is lower than the urban population, the computer and internet usage rates increased by 5% and 9%, respectively, in the rural areas. Although the increasing rate is pleasing, it is clear that the computer and internet usage rate in the urban areas is over 2 times higher than the rural areas. 24