CDW Invests in the FutureBy John Hazard | Print
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CDW's short-term sales will dip as the nationwide reseller makes significant investments in its distribution system and reorganizes its sales force, analysts said.
CDW achieved its highest fourth-quarter earnings to date last year, but the company faces less-lucrative months in 2006 as it makes investments in its sales, distribution and back office facilities for future growth, analysts said Jan. 25 following the company's announcement.
The IT reseller reported $1.61 billion in revenue in the fourth quarter$1.13 billion corporate sales, $561 million in public sector salesa 6 percent increase over the same quarter in 2004 and a record for the 22-year-old company.
CDW did $6.3 billion in sales for the year, an 8.8 increase over 2006, according to CDW's filings.
The next several quarters would prove more difficult as the company makes internal adjustments to improve sales opportunities down the road, according to Raymond James & Associates, a financial analyst firm.
The corporation has embarked on several capital improvements, namely the realignment of the corporate sales team to align account managers along geographic lines.
Analysts at Raymond James expect the sales force transformation to disrupt sales opportunities in 2006, but CDW classifies the reconfiguration as vital and a key to long-term growth.
"While we agree with the logic behind these initiatives," said Brian G. Alexander, a distribution analyst at Raymond James, "visibility into near-term results has become more limited, as transitioning accounts in a relationship-intensive business is likely to be disruptive to sales momentum."
The reseller also invested in a new warehouse in Las Vegas, 150 to 200 new account managers and the consolidation of corporate and public sector sales groups.
"We made investments for the future to ensure growth for the company," said Gary Ross, a company spokesperson.
"Geographic alignment was something we had talked about last year before we announced the new corporate structure It creates a finite set of who people who work better with constant interactionthe field sales team, inside and outside teams, and vendors will all be organized by geography. It's all tied together to make the right moves to position us for success."
The transition period should last two to three quarters, Raymond James said.
"We believe that 2007 will shape up to be a much better year for CDW," Alexander said, "with sales growth and margins likely higher than 2006."