Tech Data Lowers 4Q Guidance Due To Further U.S. Softening, HP Impact

Tech Data expects fourth-quarter earnings between 53 cents and 58 cents per share, while Thomson Financial/First Call had projected net income of 64 cents per share.

"We track [market share closely, and we don't believe we are losing share. Our numbers reflect some softening in the market," said Steve Raymund, chairman and CEO of the Clearwater-based distributor. "[Also, there are fewer shipping days and probably some [impact due to the continuing evolution of [Hewlett-Packard's strategy to PCs."

Tech Data's relationship with HP and large direct marketers is "good on both counts," despite HP's efforts to push more business direct, Raymund said.

Raymund would not detail the impact of direct marketers buying more from HP and less through distribution, but he said it was factored into Tech Data's fourth-quarter guidance.

"Clearly, there is some impact on our revenue outlook. But there is softness that extends beyond the HP program," Raymund said. "We do sell more products than HP to a lot of other customers than direct marketers. Obviously, we try to sell as much as we can to whatever reseller will buy from us and we try to support all the vendors in our portfolio."

Tech Data's sales fell 18 percent in the United States, but grew 3 percent in Europe. Raymund attributed that to favorable foreign currency rates and the fact that Europe did not see the "economic bubble" that the United States had during the dot-com days.

HP plans to consolidate distributors in Europe, but the company's strategy will not mirror its U.S. strategy because the European market is so fragmented, Raymund said.

"The same formula wouldn't apply," he said. "What I think they are going to to do is similar to the U.S.--combat Dell on major accounts. But they will limit that activity to their largest accounts and it probably will represent a smaller share of target market for them."