Tech Data: Windows 8 Could Drive Ultrabooks Growth3:45 PM EST Tue. Aug. 21, 2012
After reporting a quarter that included higher sales but lower profits than expected, Tech Data CEO Bob Dutkowsky talked about how the current economic environment is impacting the channel, and how Windows 8 might spur growth in the Ultrabook space, among other topics. Here's a look at what Dutkowsky had to say.
You talked about pricing pressure impacting earnings in the second quarter. Can you provide more details? What products? Was it early or late in the quarter, and coming from one specific competitor or from everywhere?
I wouldn't categorize the quarter in terms of being dramatically more [competitive] than other quarters. It's part of what we do. It's a competitive business. We and our competitors all have the same product on the shelf. The differentiation is availability, service, support and pricing. It was an element of the quarter, but not the dominant element by any stretch. We had categorized it as a very solid top line and if you neutralize all the puts and takes, such as us exiting and Brazil and Columbia and the foreign exchange [difference] and representing some [vendor warranty and fulfillment contract] revenue differently. If you net all that out, we grew revenue 5 percent. You listen to most of players in the IT space and that's among the better performances.
Do you expect the pricing pressure to continue, especially up until the election in November or even after that?
I don't know. That's the $64 million question: what's the state of the economy? What's going to happen before the election and after? A lot will be determined by who gets elected. Our anticipation is Q3 will be about what Q2 looked like. There's a good opportunity for that kind of mid single-digit growth opportunity for Tech Data but you have to adjust for the other things in there. There are pockets of spend: cell phones, tablets, anything mobile really is growing aggressively. Other areas, the commodity side of the business like printers, that feels pretty slow. Windows 8 is coming. That will be an opportunity to revitalize the whole laptop space. When Windows 8 tablets hit the market, that will create another opportunity. There are things out there on the horizon that could potentially change the spending opportunities.
Two other big things that expect to release or increase availability later this year are the Apple iPhone 5 and Intel Ultrabooks, could those present big opportunities to fuel IT spending?
Ultrabooks will go hand in hand with Windows 8. We haven't seen much of an uptake with the Ultrabook yet. But when Windows 8 hits, that interface and that touch capability that some might have, that's difference enough that it might stimulate that space.
We don't sell iPhones in a vast majority of our footprint. As we look out into the future, the market is going to wait and see what iPhone 5 does. In the short term, the Samsung platforms are flying off the shelf. The Galxasy S3 is an amazing device.
NEXT: Moving Into Application Hosting
Even if you don't sell the iPhone 5, could that drag along more accessories sales and fuel overall growth?
Here's what it will do. If I'm a consumer and I want the iPhone 5, maybe I'm going to keep my existing printer and not buy a new printer so I can use that money on an iPhone 5. People are trading off buying smartphones and accessories and maybe not trying [other IT [products]. I lookat more things on my phone now that I used to print. Maybe I need a screen cover and a case for a phone. I can spend $80 and not buy ink cartridges for my printer. That's a good tradeoff and tThat's what the mobility market is doing. It's diverting spending away from traditional IT spaces and more disposable dollars into the mobility space.
What device are you using right now?
Right now, I have the Galaxy S3 in my hand. And it's cool. We sell them and it's important to sit with customers and at least be able to speak to what's hot and what's neat about particular devices.
What other product areas are hot for you right now?
Our five initiatives that we focus on are data center, mobility, software, consumer electronics and supply chain. In the second quarter, we had successes in all those areas, speaking globally. Those continue to be five areas where we are investing. The weakest performer among those five is the consumer electronics space. That's completely understandable. Consumers are not spending right now. But there's also some [ambiguity] about is that a business device or a consumer device. There's a lot of consumer spending under the guise of business and a lot of business spending under the guise of consumer.
How are your software initiatives going with StreamOne and TDCloud?
They're beginning to take hold. We announced some new vendors in the StreamOne intiaitive that had cloud offerings that we're hosting under StreamOne now. That's the process that will unfold the next couple years. There's lots of momentum around software-as-a-service, hardware-as-a-service, infrastructure as a service, but the reality is VARs are not selling tons of it. They want access to it when it makes sense to customers. We're thoughtfully adding initiatives around StreamOne and TDCloud as biz opportunities become reality.
Are VARs not selling it because they need more education on the model or because the demand is not there yet?
It's a combination of those two things. The VAR has to transition his business model from buying licenses to selling it as a service offering. The end user has to be in the mindset that they have an application in the cloud. Those will happen with very specific areas over time. Areas like backup and recovery are perfect cloud applicatoins. The typical VAR didn't have an offering in that space anyway, other than selling another storage device and then managing it. It makes perfect sense for the VAR and for an SMB.
PUBLISHED AUG. 21, 2012