Tech Data Sees Earnings Drop, Cites European Issues

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 closed at $36.42, down $4.55 per share, last Wednesday after the announcement.

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 region.

Tech Data Chairman and CEO Steve Raymund said Tech Data’s focus on its IT upgrade in Europe and on integrating its acquisition of European distributor Azlan caused it to shift the focus from selling in that region.

“It was a significant distraction to the core business. A lot of things that might have been done—that we are doing today—had to be postponed. The good news is that the IT upgrade is largely complete, as is the Azlan integration, and we can now turn our sights back to the business,” Raymund said.

While Tech Data blamed the misstep on its European restructuring, the distributor has had a few hiccups recently in the United States, according to one solution provider. “They’ve had some warehouse issues they’ve been addressing, particularly in New Jersey. And their tech support has been revamped. That was a big part of doing business with them,” said the solution provider, who asked not to be named.

For 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.