We're Back, IT Execs Say, But Caution Should Reign

Speaking at the Raymond James IT Supply Chain Conference Thursday in New York, chiefs and finance executives from several companies said they will continue looking at higher-end businesses and higher margins, even as they report seeing signs of consistent IT sales growth.

"We can see the market picking up," said James Schneider, CFO of Dell Computer, the Round Rock, Texas-based direct PC maker. "I'm pretty happy. It's a lot better environment to be working in than we've had for a while.

"We have seen five consecutive quarters where we have seen good year-over-year growth," Schneider said. "So we believe the market has turned."

He added that Dell's customers "are looking for standards on enterprise products," and that it grew its EMC/Dell external-storage business by 30 percent in the third quarter of 2003 compared with the same period last year. "What we did in the last quarter was grow in a very disciplined manner," Schneider said.

As for the PC business, where Dell maintains a market-share lead in the United States, Schneider pointed out that his company has been profitable since the first quarter of 2001, while other companies in the PC space have lost money. "As we continue to grow market share, we're the only ones that have actually driven a profit," he said.

Coinciding with the conference was a report by Raymond James which said that while a "recovery has been building since June, it did not broaden until this quarter.

"In addition to improvement in the SMB sector and in Europe, we saw the first signs of improvement in the large corporate account sector," according to the report.

Kent Foster, chairman and CEO of Santa Ana, Calif.-based Ingram Micro, said the distributor reiterated its earnings forecasts last week in anticipation of questions at the Raymond James conference. The company said it anticipated quarterly sales of between $5.7 billion and $5.9 billion, with an operating profit of between $32 million and $37 million for the fourth quarter.

"We're feeling good about where the business is going [over] the next few months," Foster said.

"Even though we are all optimistic [that] corporate spending is increasing, we're not ready to say there is a straight path to glory," said Ed Coleman, CEO of CompuCom, the Dallas-based corporate reseller and solution provider.

Coleman said CompuCom has built into its plans a forecast for flat IT spending in 2004, while it continues working to shift its business to a higher value-added services model.

"I want to continue to work our way up higher into the IT value chain," Coleman said. "As we work our way up the value chain, it makes us less susceptible to the vagaries of the PC business."

Coleman said services continue to represent about 20 percent of CompuCom's revenue, but about 50 percent of its margin. The company's service strategy is to migrate companies to an off-site, help-desk model, then to a "self-service" model and, ultimately, to a "self-healing" IT solution, from the current, more costly on-site service model.

At each step, there is less cost in the service provided, Coleman said.

John Edwardson, CEO of corporate reseller CDW, indicated that,notwithstanding geopolitical uncertainty,the market seems to be looking up. "The way we measure this is the buzz of our account managers," he said. "We spend a lot of time listening to them. The buzz, if you will, is better than it's been in three years here."