Tech Data CEO Sees Robust SMB Technology Product Sales In Midst Of Market Turmoil

The way Tech Data CEO Bob Dutkowsky sees it the distributor picked a "bad day" to announce its quarterly results.

Even though the Clearwater, Fla. technology products distributor posted record second quarter sales, net income and earnings per share, the company's shares were down 53 cents in midafternoon trading to $41.98 on yet another day of plunging stock market prices.

The Dow Jones industrial average was down 409 points, or 3.6 percent, to 11,001 at noon. This after the Dow plunged 400 points on four straight days last week for the first time.

"With the earnings we just announced, we should have had a real upward draft on the stock," said Dutkowsky. "We are not down as much as everyone else. That's the beauty of it (record second quarter results)."

Boosted by double digit sales growth in U.S. SMB technology product sales, Tech Data earnings increased 23 percent to $50.1 million ($1.10 per diluted share) on an 18 percent increase in sales to $6.45 billion for its second fiscal quarter ended July 31. The Wall Street consensus was earnings per diluted share of 95 cents on sales of $6.13 billion, according to Thomson Reuters.

Although enterprise technology purchases and even consumer purchases are affected by the volatile markets and economic instability, SMB technology purchases remain strong, said Dutkowsky. "I don't think an SMB in Des Moines, Iowa cares about sovereign debt in Greece," he said. "If they need a new PC or they need a new laptop or want to buy tablets for their employees they are not worried about sovereign debt or the fact that the Portugese government can't balance their books. Even though global instabilities exist, SMB continues to plow ahead."

Solution providers themselves have said they do not expect the precipitous drop in the market to stop their robust sales growth robust sales growth. Nevertheless, the plunging market has punished a number of technology stocks.

The enterprise IT market is quicker to pull back on IT spending in wake of market volatility, said Dutkowsky. What's more, he said, the plunges in the market are also to affect "consumer" technology sales purchases. "The SMB business slows down slower and recovers faster if the economies start to get skittish," added Dutkowsky. "CFOs in Fortune 1000 companies can put the brakes on IT spending literally overnight."

Next: What Products Are Leading SMB Technology Sales Growth

Citing a PC refresh that began last year, Dutkowsky said Tech Data saw strong sales of desktops, notebooks, servers and mobility products including tablets.

Tech Data also experienced strong sales for ActivateIT, its joint venture with Brightstar through which Tech Data acts as a go-between for VARs wanting to sell smartphones and the telecom service to activate them.

Sales for that smartphone/carrier business were up 64 percent in the quarter compared to the same period one year ago, said Dutkowsky.

ActivateIT has cut through the "big challenges" VARs faced activating smartphone and handling billing with a click and pick website that is winning rave reviews from partners, said Dutkowsky. "We think this is a great opportunity for the 60,000 resellers in the US to capture pick up on the high growth of smartphones," he said.

In the mist of the market turmoil, Tech Data's board of directors authorized another $100 million in Tech Data stock repurchases. This after completing $200 million in share repurchases this year.

"Our belief in Tech Data and the strength of our company and the capacity and capabilities of our company could not be higher," said Dutkowsky. "Regardless of what Wall Street looks like or macro-economic factors, our board of directors believes Tech Data is a good buy."

"In effect, what we are choosing to do is buy Tech Data (shares) versus buying another distributor," said Dutkowsky. Since 2005, Tech Data has spent $800 million repurchasing its shares.

Dutkowsky, a 35-year-veteran of the technology industry, says he has seen market volatility in years past including the 1987 stock market crash and dot.com collapse, but the current market represents a period of "overall instability" that is an indication of just "how fragile the macro-economic infrastructure is."

"There are different sets of fundamental issues today that the world has got to figure out how to sort out," he said. "And I believe they will."