Tech Data Forecasts 20% Quarterly Decline

By Jessica Davis  |  Print this article Print

Even while forecasting a drop in sales of 20 percent for the first quarter, technology distributor Tech Data's president of the Americas tells Channel Insider that many pundits are hoping that the first quarter represents the bottom of the recession. Still the outlook beyond the first quarter remains murky.

Tech Data is forecasting a first-quarter revenue drop of 20 percent, even as the technology distributor hangs onto strong margins. The forecast came as part of Tech Data's earnings announcement this week.

But what follows the forecast in the quarters to come remains a murky mystery as Tech Data and its solution provider partners say that it's tough to see when demand will return in the market.

"Our [solution provider] customers typically would have visibility two quarters out," says Ken Lamneck, Tech Data's president of the Americas, in an interview with Channel Insider. "Their visibility has been drawn out.  VARs are seeing the same thing. Where they had run-rate business—business that typically happened—everything has become a deal."

"…Everybody is starting at zero now in their capital budgets and then deciding what they have to do."

Lamneck says that this recession is different from the dot-com bust after 2000, because back then when everyone was concerned about Y2K issues, IT organizations did a tremendous number of upgrades.

"We were buying more equipment and upgrades faster than we needed to," Lamneck says. "We always said we sold two years' worth of equipment in one year."
But the drop-off in demand that is being experienced now is due to the difficult economy, according to Lamneck. Still, there are some industry observers that believe that the current quarter will be the bottom and demand will soon return, Lamneck says.

In either case, projects that are continuing to get a lot of attention are virtualization, server consolidation and projects that will deliver a return on investment very quickly and save money.

Tech Data reported fourth-quarter revenue of $5.71 billion, a 12 percent decline from the the $6.48 billion reported during same period a year ago. Fourth-quarter net income came in at $58.6 million or $1.17 per share, up from $50.2 million or 92 cents per share from the same period last year.

For the full year ended Jan. 31, 2009, Tech Data reported revenues of $24.08 billion compared with $23.42 billion during the previous year.  Net income for the full year came in at $123.6 million, or $240 per share compared with $108.3 million or $1.96 per share for the same period last year. 

Jessica Davis covers the channel for eWeek and Channel Insider. Her technology journalism career began well before anyone heard of the World Wide Web and has included stints at Infoworld, Electronic News/EDN, and the Philadelphia Business Journal. Her work has also appeared on CNN and Forbes.com. She has covered hardware, software and networking, as well as the business side of technology. She has won several journalism awards, including a national ASBPE award for best staff-written column, and was named Marketing Computers hardest working tech journalist on their inaugural list of top tech journalists. Jessica can be reached at jessica.davis@ziffdavisenterprise.com

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