Tech Data Quarter Points to 2010 Recovery

By Jessica Davis  |  Print this article Print


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IT distributor Tech Data reported a year-over-year decline in net sales, but that was just part of the story. Third-quarter earnings beat Wall Street's expectations and represented an increase in net sales in sequential quarters. Tech Data CEO Bob Dutkowsky shared his insights into the state of the technology market with Channel Insider following the earnings release.

IT distributor Tech Data’s (NASDAQ:TECD) CEO says there is a greater tone of optimism among the VARs he’s spoken to today than four quarters ago.

That doesn’t necessarily mean a quick conversion into sales, he says, but the pipeline is more robust than it has been. And that points to 2010 as a year of recovery rather than another year of decline.

Tech Data CEO Bob Dutkowsky shared his thoughts on the state of the IT industry and technology sales with Channel Insider following the IT distributor’s third-quarter earnings release.

Tech Data reported higher net income—$43.1 million compared with $16.8 million for the same period a year ago.

Net sales declined 8.1 percent to $5.6 billion, compared with $6.1 billion for the same period a year ago. However, third-quarter net sales represented an 8.8 percent increase over net sales in the second quarter.

As for 2010, while Dutkowsky says that we look to be at the end of declines, the industry shouldn’t be expecting big growth. Rather, he believes, the market opportunity will return to 2008 levels, which is an improvement over 2009.

Market opportunities for 2010 include vertical solutions, particularly health care, and perhaps also open-source technologies, he tells Channel Insider.

Here’s where Dutkowsky weighs in on some of the other questions of the day.

Will there be a big PC refresh next year?
  "If there is, we are ready for it," he says. But Dutkowsky says he believes it will be more of an evolution than revolution as IT shops replace PCs as they break rather than as part of a big initiative all at once.

What opportunities are VARs seeing in the pipeline? Dutkowsky says it’s across the board of technologies, from servers to storage to networking to laptops to various types of software to virtualization. "Digital signage continues to be a good segment, as is security—both physical and system security," he says. "The health care opportunity is really big, and literally all the VARs want to understand how to get a piece."

Any big changes quarter over quarter in terms of hot technology sales?
Dutkowsky says no real obvious differences here, but one set of products that seems to be selling better than before are flat-screen TVs and digital displays. "We think that will continue to be hot in Q4, too, in both business and consumer sales."  Dutkowsky notes that VARs didn’t used to sell this type of technology, but now customers want to put them in every conference room. "It looks like it’s stronger because it is incremental to us," he says.

Other big technologies for 2010? "Mobility will continue to be an area that has potential to grow," he says. And unified communications and network security are other target areas for 2010 and for the years that follow.

What about managed services? "There hasn’t been a groundswell of interest in managed services," he says. "At the VAR level, the challenge is to radically change the business model, which is radically different. It looks nice on a PowerPoint, but as VARs decide to make that transition, they learn it’s not an easy thing to do. When they do decide to do it, though, we are prepared to help them."

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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