Tech Data's Recession 2009 Strategy Pays Off

By Jessica Davis

Ask a technology executive about how business was in 2009 and you might hear "not great," or "down."

You don’t hear very many executives using the word "exceptional" these days when it comes to describing their company’s performance in the past year, but that’s just the word that Tech Data CEO Bob Dutkowsky used to describe Tech Data’s fourth quarter.

"It was exceptional," he told Channel Insider. "The company performed very well in a continuing tough economic environment. We had record earnings for the quarter. And we had record earnings for the year." 

Dutkowsky attributes that success to diversification across product lines, geographies and vendors, as well as a focus on more profitable solutions, plus the company’s execution of its strategies. For example, Tech Data diversified into smartphones in Europe through its joint venture Brightstar there. And in the United States, Tech Data has added LCD televisions to its lineup, which contributed well to its Q4 net sales.

Plus, Tech Data left some big deals on the table in 2009, Dutkowsky said, including a $50 million software bid that Tech Data had traditionally won in years past, but that went to a competitor this time around who underbid Tech Data’s cost of acquiring the goods.

"It happened a lot in the past year," Dutkowsky said "It’s the reason we were able to have the profits we had. If pricing gets irrational we walk away."

While many in the industry believe 2009 recession put tremendous pressure on pricing during the year, Dutkowsky said he doesn’t think pricing was any more challenging than it has been any other year.

"There are opportunities and deals that become very competitive, and they are big deals so they are very visible," he said. But much of the business is Web business. "Price is just one of the things that customers look at. If you don’t have the right product, they won’t buy." And while price usually ends up as one of the top five reasons why a customer chooses to deal with Tech Data, it’s seldom number one, according to Dutkowsky

Tech Data’s Q4 showed an increase in net sales to $6.3 billion as compared to $5.7 billion for the same period a year ago – a time when the industry was experiencing steep declines. The company attributes part of the 10 percent year-over-year increase to the impact of currencies.

Tech Data’s Q4 net income totaled $70.1 million, or $1.35 per diluted share, compared to net income of $57 million, or $1.14 per diluted share for the prior-year period.

For the fiscal year ended Jan. 31, Tech Data reported net sales of $22.1 billion, an 8.2 percent increase from the $24.1 billion it had reported the year before. A strengthening U.S. dollar negatively affected the net sales comparison by about 2 percentage points, Tech Data said.

Net income for the year was $180.2 million or $3.54 per diluted share compared to $117.3 million or $2.28 per diluted share for the year before.


This article was originally published on 2010-03-05