Tech Data Shares Jump After 1Q Earnings Rise 49 Percent

Tech Data's shares were trading up 12 percent Thursday after the distributor beat Wall Street estimates for its first fiscal quarter. Shares were trading at $33.00, up $3.55 per share, after Tech Data reported $31.8 million in net income (or 63 cents per share) on $4.99 billion in sales in the quarter ended April 30, compared to earnings of $21.4 million (or 40 cents per share) on $6.07 billion for the year-ago quarter.

While sales fell 18 percent in the quarter, net income increased 49 percent for the same period, thanks to "strength in execution and prudent management disciplines," according to CEO Bob Dutkowsky.

"Our net sales were affected by the challenging environment and lower demand in IT spending, but we have worked to improve our execution," Dutkowsky told analysts on a conference call.

Wall Street had been expecting earnings of 34 cents per share on $4.94 billion in sales, according to Thomson Financial.

In the Americas, sales were $2.21 billion in the quarter, down 18.1 percent from the same period last year. European sales were $2.78 billion, down 17.4 percent over the prior year. Peripherals accounted for 40 percent of sales, the largest product segment. Systems accounted for 30 percent of sales, and networking and software each accounted for about 15 percent.

Hewlett-Packard represented 30 percent of sales, consistent with the prior-year period. The vendor was the only company to account for more than 10 percent of Tech Data's total sales.

During the conference call, Dutkowsky said pricing has remained aggressive, but it did not change much in the fourth quarter compared to the first quarter.

"We're probably being a little more selective to take in the revenues and pricing that we're willing to accept in the Americas. In the long run, we think it will serve our business effectively," he said.

Tech Data has also worked with its vendor partners on restructured rebate programs that allow the distributor to hit goals in this depressed IT demand environment.

"In some cases we were able to get caught up; in other cases it didn't catch up. It's a normal evolving process with the business declining," he said.

Dutkowsky also touched briefly on Tech Data's new Dell relationship but did not detail how the business is going. "We would not enter into a new relationship if we didn't view it as incremental for our business and we wouldn't enter into a relationship that didn't generate at least on-par profitability," he said.

Tech Data did not offer specific guidance for its current July-end quarter, but Jeff Howells, CFO and executive vice president, said year-over-year sales declines should be similar to the first quarter. "It seems like it's not getting any worse out there," he said.

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