New PCM President Adds Software, Sales Resources, Eyes Security Portfolio

PCM's new president said he has reorganized the company's sales organization, and boosted software and security investments as quarterly earnings stumbled.

The El Segundo, Calif.-based company, No. 27 on the CRN Solution Provider 500 list, saw year-over-year net income for its fourth quarter, ended Dec. 31, drop 13 percent from $1.81 million last year to $1.57 million this year, or 16 cents per share when adjusted to account for discontinued operations. The Wall Street consensus was 17 cents per share, according to Thomson Reuters.

Quarterly sales rose 1 percent from $357.2 million to $359.2 million, well below analyst expectations of $367.8 million.

[RELATED: PCM Names Former Ingram Micro Exec Its New President]

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"We have chosen to remain laser-focused on our migration to a more office solutions sales environment," Frank Khulusi, PCM chairman and CEO, said during the earnings call. "Maybe we left a little bit on the table with respect to the commodity stuff, but change is not easy."

Investors sent PCM's stock up 0.1 percent Friday morning to $10.73 on the quarterly results, which were released after the market closed Thursday.

New PCM president Jay Miley said he's been busy in his first two months on the job, shifting management responsibilities on the sales team, and realigning business units and sales territories.

Miley, who was previously vice president and general manager of Ingram Micro's advanced technology division, replaced Khulusi in the presidency role. Khulusi took a 30 percent -- or $250,000 -- salary cut to partially offset the cost of adding Miley.

Miley added that he's already made significant investments in PCM's field sales resources, software sales teams and advanced solutions group to better assist in the corporate business model.

Going forward, Miley said he sees a large investment opportunity to position PCM more strongly in the security environment.

"Given all the breaches you read about today in the Wall Street Journal, there's nothing but opportunity there, and I think we're focused on charting a path forward," Miley said.

PCM already has partnerships with many of the leading security software manufacturers in the marketplace, Miley said, and anticipates that stellar returns in that area will endure.

Although all the changes will be disruptive to PCM's first-quarter financial results, Miley said the company is targeting double-digit sales growth beginning in the second quarter and expects earnings margins to exceed 2.5 percent by the end of 2015.

Khulusi acknowledged that many of PCM's competitors benefited in 2014 from focusing on the operating system refresh stemming from the end of support for Windows XP.

But PCM has moved beyond dealing with processing agents and notching commodity sales, going so far as to close all four of its remaining retail locations in 2014, and has no plans to turn back now.

"We're not going to waver with respect to our migration path and are focused on being more of a solution provider and more relevant as a consultant, and as an adviser and as a suite player," Khulusi told investors.

To wit, PCM has over the past year seen a 19 percent decline in tablet sales, a 16 percent decline in notebook sales and a 6 percent fall in desktop sales.

The solution provider has instead shifted its attention to networking, software and storage, where sales have grown by 55 percent, 15 percent and 13 percent over the past year, respectively.

PCM's top vendors by revenue in the most recent quarter were Apple, HP, Cisco, Microsoft, Oracle and Dell, the company said.

Ultimately, Miley expects PCM's continued move toward becoming a true solution provider will significantly improve shareholder value during 2015.

PUBLISHED FEB. 13, 2015