Tech Data Q2 Profit Jumps 59 Percent, CEO Credits Execution

Tech Data Thursday handily beat analyst expectations for its second fiscal quarter, posting a year-over-year profit increase of 59 percent, even as quarterly revenue tumbled 16 percent.

In an interview with Channelweb.com editors, CEO Robert Dutkowsky credited Tech Data's improvement in execution, the diversification of its product line and geographies and its ability to innovate as reasons for the strong showing.

"When you put that all together in a quarter, you get the results like we've had," he said. "It takes a while for that hard work to settle in. My view of the results is we're seeing the results of the hard work of a lot of people -- and that's in a soft economy. If the economy were better around the globe, they'd be even better."

In the quarter ended July 31, the distributor reported earnings of $35.2 million, at 70 cents per share, up from $22.1 million, or 42 cents per share, from the same period a year ago. Revenue was $5.18 billion, down from $6.17 billion a year ago.

A Thomson Reuters poll of analysts had most expecting earnings of 45 cents per share on sales of $5.04 billion. The Q2 earnings report jolted Tech Data's stock in morning trading Thursday, at one point hitting $37.34, up 9.5 percent from its Wednesday close. That's the highest Tech Data's stock has traded since December 2007.

On the earnings call, Tech Data CFO and Executive Vice President Jeffrey Howells said currency fluctuations -- a stronger dollar and weakening foreign currencies -- benefited the quarterly results. Howells also said he expected sales to continue to decline in Tech Data's third quarter, "but with some moderation compared to the decline in the first half of the fiscal year."

Tech Data's Americas revenue was $2.4 billion, a 15 percent year-over-year decline. In Europe, revenue was $2.8 billion, a seven percent decline when currency fluctuations were factored in. Howells noted that the Americas region seemed to be stabilizing while Europe might suffer continued declines.

In the interview, Dutkowsky said performance of enterprise business vs. small and medium business varied by region.

"All of the segments performed about what we expected them to," he said. "All segments are down year over year, so right now it's a question of whether they declined more than we thought. One reason we may see SMB performing better than others is that we've increased our sales coverage in the SMB in every region. In general, when the economy turns, the enterprise can slow spending down quicker than the SMB. Another point is that the stimulus money might be finding its way to the enterprise faster than the SMB space. I don't have any data to support that, it's just my postulation, but clearly, stimulus dollars get to GM faster than they do the small business corner store in Tampa."

Next: Dutkowsky On Stimulus, Dell And IBM