Tech Data Shares Drop 12 Percent On Disappointing Outlook

Tech Data earned $29.5 million, or 52 cents per share, on $5.53 billion in revenue for its 2006 fiscal fourth quarter ended Jan. 31, down from a profit of $59.3 million, or 99 cents per diluted share, on $5.60 billion in sales a year earlier. The company’s shares were trading at $36.07, down $4.90 per share, Wednesday morning.

The fourth-quarter results include $6.8 million in restructuring charges and $4.4 million in consulting costs related to a restructuring of the distributor’s Europe, Middle East and Africa (EMEA) region. The 2005 fourth quarter included an $11.5 million benefit, or 19 cents per share, due to the favorable resolution of tax examinations.

Tech Data has entered an agreement to sell substantially all of the assets and liabilities of its training business in the EMEA region, which the company considers a non-core operation. The transaction is slated to close this month. The training business earned $1 million, or 2 cents per share, in the fourth quarter and was included as discontinued operations in the company’s financial statement.

In the fourth quarter, North American sales rose 7.7 percent to $2.4 billion, or 43 percent of total revenue. EMEA sales fell 7.2 percent to $3.1 billion, or 57 percent of revenue. In local currency terms, EMEA sales increased 2.7 percent year over year.

Tech Data’s gross margin was 4.84 percent in the fourth quarter, down from 5.22 percent a year earlier. The decline stems from market challenges in the EMEA region, the company said.

For the 2006 fiscal year, Tech Data earned $26.6 million, or 45 cents per share, on $20.48 billion in revenue. In the prior fiscal year, the company earned $162.5 million or $2.74 per share, on $19.73 billion in sales.

In the current quarter, which ends April 30, Tech Data projects a profit of $16 million to $19 million, or 28 cents to 34 cents per share, excluding restructuring charges of about $10 million to $12 million. The company expects sales of $4.85 billion to $4.95 billion in the quarter. Financial analysts had forecast earnings of about 59 cents per share, excluding charges, and revenue of $5.14 billion.

The results likely aren’t the last for Steve Raymund as Tech Data’s CEO. Raymund announced in January that he planned to step down as CEO once a replacement was found. He said on a conference call with analysts that the CEO successor search won’t be completed anytime soon.

“It’s coming, but it’s still in the early days. During the process, we were warned that it would take six months or more. My guess is it will go the full course,” Raymund said. He plans to retain his role as chairman.