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Tech Data Sees Strong Quarter as IT Spending Climbs

IT distributor Tech Data (NASDAQ:TECD) saw 13 percent growth in sales for its most recent quarter and a 44 percent jump in net income, a performance that adds another data point to the growing evidence that there’s an economic recovery under way. "I think we are in recovery," Tech Data CEO Bob Dutkowsky tells Channel […]

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Jessica Davis

May 21, 2010

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IT distributor Tech Data (NASDAQ:TECD)
saw 13 percent growth in sales for its most recent quarter and a 44 percent
jump in net income, a performance that adds another data point to the growing
evidence that there’s an economic recovery under way.

"I think we are in recovery," Tech Data CEO
Bob Dutkowsky tells Channel Insider. "I don’t think we are out of the
woods yet. Earlier this week when the jobs report came out and it didn’t look
that good, you saw the Wall Street reaction. We are still in an uncertain
environment and any good news will swing it up and bad news will swing it
down."

But for Tech Data at the moment there’s a measured sense of cautious optimism
in the air. Dutkowsky reports that demand in both Europe
and the Americas appears to be on the upswing, even though there are
pockets that are still struggling, such as Eastern Europe. Revenues are tracking seasonally and Dutkowsky
expects them to continue to do so for the rest of the year.

Tech Data reported net sales of $5.62 billion, up from $4.99 billion from the
same period a year ago. Net income climbed to $45.6 million, up from $31.8
million for the same period last year.

Dutkowsky credits Tech Data’s strong earnings per share for this quarter and
last quarter, which set a company record, to good planning.

"It would be really easy for us to spend—to get intoxicated with the
upside," he says. "What Tech Data does very well is we have the
discipline not to go down that track. That is an art form. It’s a process you have to work out every single day to
make sure you are matching the size of your company to the size of the
opportunity."

As for technology areas at the tops of CIO
and business priority lists for spending now that budgets have been unfrozen, the
data center ranks high. That includes servers, storage, virtualization and
networking. Tech Data’s Advanced Infrastructure unit grew by 31 percent in the Americas and 19 percent in Europe.

Other areas of strength included displays and television products, an area that
Dutkowsky says has shown strength for several quarters in a row.

On the client side, desktops and laptops got re-energized during the quarter,
according to Dutkowsky.

"We think that is the beginning of the refresh cycle that everybody has
been talking about," he says.

But thin clients and desktop virtualization have not yet taken off, in spite of
analyst predictions and solution provider enthusiasm.

"It’s really easy to replace like for like," Dutkowsky says.
"I’ve got 500 desktops and I replace them with 500 desktops." But
it’s more complicated to develop a plan to move to a new architecture.
Dutkowsky says he thinks it will happen, just not now.

Something else VARs have been slow to embrace is Tech Data’s managed services
offering.

"Many of our VARs have not made the jump to the managed services business
model," Dutkowsky says. "Their business is built around the
traditional model of selling products and supporting those products. The other
piece is that the distributor has to be careful about how they manage in
managed service value-add. They can’t step on the toes of the VAR,
and we’ve been thoughtful and cautious about that."

Tech Data Sees Strong Quarter as IT Spending Climbs

Jessica Davis

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