As the world's second-largest distributor to Ingram Micro, Tech Data knows it's got to be the company that tries harder.
While it's made significant gains through the years,it was more profitable than rival Ingram Micro in the last quarter, for example,it still has a ways to go before it will dethrone the Santa Ana, Calif., company as the industry leader in wholesale IT products distribution. Ingram, for example, is still worth more. At press time, Ingram's market cap totaled $1.9 billion, compared with Tech Data's $1.3 billion. And Ingram has less debt than Tech Data.
But give Tech Data its due. The Clearwater, Fla.-based company is trying hard to measure up to Ingram,or anyone else, for that matter,in many respects. Its sales per employee top Ingram's ($1.6 million vs. $1.4 million, respectively) for example, and so does its sales per share ($276 vs. $158).
Dethroning Ingram Micro, however, will take more than besting the company in a few areas of fiscal management. True leadership will come from securing exclusive deals, attracting more exclusive clientele and making the most of new technology. To that end, the company has demonstrated interest in Sun and even Dell, to name a few, while appealing to high-end solution providers to consolidate their purchases with Tech Data.
Recently, company CEO Steve Raymund discussed with VARBusiness editorial director Robert DeMarzo and senior executive editor T.C. Doyle ways Tech Data is distinguishing itself in the market and what he thinks of several recent developments. Below are some of the observations the longtime industry veteran shared.
On Windows XP: We've sold some, quite a few copies, actually,a little more than we originally thought. We're close to plan. We're encouraged, though the mix is a bit different from what we thought. We've sold to more consumer-oriented segments than you might have expected. At some point, it will be a business phenomenon. When that will happen, I don't know. But the ripple effect,the memory, faster processors and even new boxes,will be good for the industry.
On the economy: More things need to happen before we will see the real bottom. That could be a shift in consumer confidence. I think that confidence is the biggest issue right now. Demand may have bottomed out, but that's no guarantee of the future. It could bottom out for three months, then step down or step up. Just because we have three months where demand doesn't get any lower doesn't mean the fourth is going to be better. That said, there are some positive things happening. Interest rates, for one, are way down, obviously.
On credit: It's a big issue. Sure, rates are down. And money is cheap right now. But banks are tightening up credit considerably. It doesn't help solution providers much when they can't get to money, no matter what it costs to borrow.
On managing delinquent or struggling VAR customers: Obviously, we have to offer some measure of flexibility in these times to our best customers. That's just good business. But we are fairly straightforward in those dealings. If somebody is making a good-faith effort and has a plan to pay down debt to some degree, we don't want to put them out of business. But at the same time, we're not going to prop someone up. We have to stand behind certain financial metrics. I think most customers are healthy, but there are certainly more today that are struggling. The slowdown has affected us all, but in different ways. Some are doing fairly well and increasing market share. Others, such as large corporate resellers, are feeling more pain.
On the downfall of Web integrators, ASPs and smaller VARs: It's not so much a problem of [these business models but more a fact that customers stopped buying.
On convergence: We're using it internally. We haven't made it internally across the board. But for certain applications,like call-center ID,it's working.