After reporting a quarter that included higher sales but lower profits than expected, Tech Data CEO Bob Dutkowsky talked about how the current economic environment is impacting the channel, and how Windows 8 might spur growth in the Ultrabook space, among other topics. Here's a look at what Dutkowsky had to say.
You talked about pricing pressure impacting earnings in the second quarter. Can you provide more details? What products? Was it early or late in the quarter, and coming from one specific competitor or from everywhere?
I wouldn't categorize the quarter in terms of being dramatically more [competitive] than other quarters. It's part of what we do. It's a competitive business. We and our competitors all have the same product on the shelf. The differentiation is availability, service, support and pricing. It was an element of the quarter, but not the dominant element by any stretch. We had categorized it as a very solid top line and if you neutralize all the puts and takes, such as us exiting and Brazil and Columbia and the foreign exchange [difference] and representing some [vendor warranty and fulfillment contract] revenue differently. If you net all that out, we grew revenue 5 percent. You listen to most of players in the IT space and that's among the better performances.
Do you expect the pricing pressure to continue, especially up until the election in November or even after that?
I don't know. That's the $64 million question: what's the state of the economy? What's going to happen before the election and after? A lot will be determined by who gets elected. Our anticipation is Q3 will be about what Q2 looked like. There's a good opportunity for that kind of mid single-digit growth opportunity for Tech Data but you have to adjust for the other things in there. There are pockets of spend: cell phones, tablets, anything mobile really is growing aggressively. Other areas, the commodity side of the business like printers, that feels pretty slow. Windows 8 is coming. That will be an opportunity to revitalize the whole laptop space. When Windows 8 tablets hit the market, that will create another opportunity. There are things out there on the horizon that could potentially change the spending opportunities.
Two other big things that expect to release or increase availability later this year are the Apple iPhone 5 and Intel Ultrabooks, could those present big opportunities to fuel IT spending?
Ultrabooks will go hand in hand with Windows 8. We haven't seen much of an uptake with the Ultrabook yet. But when Windows 8 hits, that interface and that touch capability that some might have, that's difference enough that it might stimulate that space.
We don't sell iPhones in a vast majority of our footprint. As we look out into the future, the market is going to wait and see what iPhone 5 does. In the short term, the Samsung platforms are flying off the shelf. The Galxasy S3 is an amazing device.
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