Tech Data Forecasts Strong Q1

SMB is still strong, Tech Data CEO Bob Dutkowsky told Channel Insider, and that's keeping the distributor insulated from recession problems.

If there's a recession going on, no one told IT distributor Tech Data. In reporting its fourth-quarter and year-end earnings on March 4, the company announced that it just concluded a year where it posted record net sales for every quarter.

And the company is forecasting higher sales again in the first quarter. CEO Bob Dutkowsky said the company's SMB (small and midsize business) focus and diversified industry strategy have insulated it from trouble so far.

"Anything short of calling the IT spending environment uncertain would be naïve," he said "We see some softening in some markets.  But we focus on SMB. VARs that sell to homebuilders, they see softness. VARs that sell into financial services, they see weakness. Those are two of the hundreds of industries that we cover.  The diversity of our business model lets us weather the ups and downs better."

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For its first fiscal quarter this year, which ends April 30, Tech Data said it expects net sales to be in the range of $5.65 billion to $5.80 billion, which assumes mid-single-digit year-over-year growth in the Americas and a low single-digit decline in Europe on a local currency basis.

"Each of our vendors has their own guidance they've put out in the marketplace," Dutkowsky told Channel Insider.  "We are the aggregate of all that guidance. For example, [Hewlett-Packard] is 28 percent of our business, and HP is pretty bullish on what this year holds. Other vendors are not nearly as optimistic. But we believe we've responsibly laid out where the economy will go."

Net sales for the fourth quarter of fiscal 2008 totaled $6.5 billion, an increase of 5.9 percent from $6.1 billion in the prior-year period.

GAAP (generally accepted accounting principles) net income totaled $50.2 million, or 92 cents per diluted share, compared with net income of $36.1 million, or 66 cents per diluted share, for the same period a year ago.

For the full year, net sales reached $23.4 billion, a 9.2 percent increase over the $21.4 billion in the previous year. On a regional basis, net sales in the Americas represented 47 percent of net sales, and increased 10.4 percent to $11.0 billion from $9.9 billion in the prior-year period, the company said in a statement. Europe represented 53 percent of net sales, and increased 8.2 percent to $12.4 billion from $11.5 billion for the fiscal year.

"We added $2 billion in sales during this fiscal year," said Dutkowsky.  "There's a lot of companies in our industry that aren't even $2 billion in sales. Almost all of that was organic growth."

GAAP net income totaled $108.3 million, or $1.96 per diluted share, for the fiscal year ended Jan. 31, 2008, compared with a net loss of $97.0 million, or $1.76 per diluted share, in the prior-year period. On a non-GAAP basis, excluding the loss on disposal of subsidiaries and restructuring charges noted above, net income was $138.9 million, or $2.51 per diluted share, for the fiscal year ended Jan. 31, 2008, compared with non-GAAP net income of $77.3 million, or $1.40 per diluted share, for the fiscal year ended Jan. 31, 2007.

Separately, Tech Data announced plans to acquire Scribona, a distributor that serves the Nordics, with sales of about $1 billion a year, Dutkowsky said.  That equals about the business that Tech Data already does in the region. Dutkowsky said he expects the deal to close in the second quarter.

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