Q2 IT Sales Through Distributors Still Slow, But Stabilizing

North American shipments of IT products through distribution are projected to decline by 16 percent compared with the year-ago quarter, according to Raymond James & Associates' quarterly IT Demand Survey. Globally, IT sales through distribution were down 15.5 percent in the second quarter compared with last year but up 4.1 percent comparedwith the March quarter, according to Raymond James.

The 15.5 percent decline actually ends a string of six straight quarters of decelerating growth and could be the first signs of stability, albeit at a low level, noted Raymond James in the report.

"We believe that the timing of a recovery in tech spending has everything to do with corporate profits and credit as opposed to working off excess capacity, which was the case in 2001. On a positive note, credit is becoming less constrained and corporate profits may be nearing a cyclical low as expenses are cut. Historically, IT spending has lagged these inflection points by a couple of quarters. This fact, in addition to easier comparisons, bodes well for next year," according to the Raymond James report.

Sales through corporate, government and SMB-focused resellers are expected to decline by 16.3 percent year-over-year and increase 8.8 percent compared with the March quarter, according to Raymond James.

"Unlike the March period, when no customer segment was spared, SMB and public sectors improved somewhat while large accounts continued to deteriorate," the report stated.

Second-quarter SMB sales are expected to be down 20.1 percent compared with the year-ago quarter, but that compares with a 24.7 percent year-over-year decline in the March quarter. Public sector sales through resellers are expected to increase 4.8 percent year-over-year compared with a 5.6 percent year-over-year decline in the first quarter.

Large corporate reseller sales are expected to fall 18.9 percent compared with the second quarter last year. In the first quarter, large corporate sales fell 10.3 percent compared with the year-ago period.

Scott Brown, Raymond James' chief economist, noted in the report that a macroeconmic recovery will still occur gradually. Residential home-building and motor vehicle sales have shown signs of stabilizing and corporate profits have begun to improve, but the labor market remains weak and consumer spending growth is likely to be subdued, he wrote.

"A sustained rise in gasoline prices and long-term interest rates could thwart the recovery process," he wrote.