Tech Data Increases 4Q Guidance On 3Q Earnings

The Clearwater, Fla., distributor also beat estimates in the third fiscal quarter ended Oct. 31.

Two weeks ago, Tech Data signed a deal to be Dell's primary supplier for components and peripherals, a two-year deal that could be worth up to $650 million, distribution sources said.

Tech Data expects net income of between $42 million and $45 million, or 70 cents to 75 cents per share, in the fourth quarter ending Jan. 31. Analysts were expecting 69 cents per share for the fourth quarter. Revenue is expected to be between $5.15 billion and $5.30 billion. Analysts were predicting $5.07 billion in sales.

Tech Data Chairman and CEO Steve Raymund declined to comment on the Dell deal because the distributor won't discuss customer relationships without the customer's approval, he said. But Raymund did say large procurement contracts rarely impact Tech Data's relationships with other solution providers.

"Efficiency gains are related more to our own efforts to improve our internal operations to deliver better value to our customers. They are not dependent on any one relationship," he said.

Many solution providers, including Curtis Jacobson, president and CEO of Corporate Technology Group, a Missoula, Mont.-based solution provider, are wondering how the Tech Data-Dell relationship will affect their own businesses.

"I know it could cause me problems and make Dell more aggressive, more competitive, but hopefully it will grow Tech Data sales and lower our costs long-term," Jacobson said.

Tech Data earned $37.8 million, or 64 cents per share, on $4.77 billion in sales for the third quarter. The results compare to $26.5 million, or 46 cents per share, in net income on $4.40 billion in revenue in the year-ago quarter.

Analysts had expected earnings of 55 cents per share, according to Thomson Financial/First Call.

"In terms of product areas, mobile computing, IP telephony, security appliances, storage, software licensing, POS and plasma monitoring were big," Raymund said.

Tech Data has organized specialized business units around several of those technologies, which has helped drive growth, Raymund said.

Tech Data's results mirror the performance of Corporate Technology Group, Jacobson said.

"We're starting to grow again. We'd gone down substantially and it's accelerating again," he said. "Over the last six months, Tech Data has helped us grow through their programs. Their [specialty business units] allow us to focus on those different technologies. They're doing a great job."

Tech Data shares were trading at $44.54 last Wednesday afternoon, up $1.63, or 4 percent per share, following the announcement.