The Best And Worst Channel Stocks Of Q3 2014

Channel Stock Losers Outnumber Winners Nearly 4-To-1 In Q3

The Dow Jones Index was up 1.3 percent in the third quarter while the Nasdaq was up more than 1.9 percent. But most of the publicly-traded solution providers followed by CRN didn't fair nearly as well. Only five of the 24 companies on this index saw their shares increase in value during the quarter. Nineteen suffered stock price declines during that time.

Here's a look at who was up and who was down in the third quarter, based on stock closing prices between June 30, 2014 and Sept. 30, 2014.

PC Connection

CEO: Timothy McGrath

June 30, 2014: $20.69

Sept. 30, 2014: $21.47

Change: +3.8%

PC Connection (No. 24 on the CRN 2014 Solution Provider 500 list) reported revenue in its second quarter ended June 30 was $633.2 million, up 14 percent from the same period last year. Net income for the Merrimack, N.H.-based company was $11.4 million, up almost 25 percent year-over-year.

Syntel

CEO: Nitin Rakesh

June 30, 2014: $85.96

Sept. 30, 2014: $87.94

Change: +2.3%

In September Syntel (No. 40 on the CRN 2014 Solution Provider 500 list) named Christopher Mason to be the solution provider's head of North American sales.

Syntel, based in Troy, Mich., reported revenue for its second quarter ended June 30 of $228.3 million, up 13 percent from the same period one year before. Net income was $59.3 million, up nearly 25 percent year-over-year.

CACI International

CEO: Kenneth Asbury

June 30, 2014: $70.21

Sept. 30, 2014: $71.27

Change: +1.5%

In September CACI (No. 16 on the CRN 2014 Solution Provider 500 list) was awarded a $212 million blanket purchase agreement to provide desktop support services to the U.S. Dept. of Homeland Security.

CACO reported revenue of $905.7 million in its fourth quarter ended June 30, down 0.8 percent from the same period one year earlier. Net income for the Portsmouth, N.H.-based company was down 3.7 percent to $36.5 million.

Accenture

CEO: Pierre Nanterme

June 30, 2014: $80.84

Sept. 30, 2014: $81.32

Change: +0.6%

Systems integrator Accenture (No. 3 on the CRN 2014 Solution Provider 500 list) expanded its presence in the big data arena in July when it struck a strategic alliance with Hadoop technology vendor Hortonworks.

Accenture reported revenue for its fourth quarter ended Aug. 31 grew nearly 10 percent to just shy of $8.3 billion. Net income for the quarter was $760.2 million, up 4.5 percent year-over-year.

Micros Systems

CEO: Peter Altabef

June 30, 2014: $67.90

Sept. 8, 2014: $67.99

Change: +0.1%

Oracle acquired Columbia, Md.-based Micros Systems (No. 29 on the CRN 2014 Solution Provider 500 list) for $68 per share or $5.3 billion on Sept. 8. Oracle gained the solution provider's hardware and point-of-sale applications for retail, hospitality and hotel industries as a result of the deal.

Black Box Network Services

CEO: Michael McAndrew

June 30, 2014: $23.44

Sept. 30, 2014: $23.32

Change: -0.5%

Black Box (No. 35 on the CRN 2014 Solution Provider 500 list) is the first company on our channel stocks watch list to record a share price decline in the third quarter.

The Lawrence, Pa.-based solution provider reported revenue of $245.2 million for its first fiscal quarter ended June 28, down 1 percent from the same quarter last year. Net income was down 43 percent year-over-year to $3.9 million.

SS&C Technologies

CEO: William Stone

June 30, 2014: $44.22

Sept. 30, 2014: $43.89

Change: -0.7%

SS&C Technologies (No. 41 on the CRN 2014 Solution Provider 500 list) reported revenue of $188.7 million for its second quarter ended June 30, up more than 6 percent from the same quarter one year earlier. Net income for the Windsor, Conn.-based solution provider grew more than 4 percent in the quarter to $27.2 million.

CDW

CEO: Thomas Richards

June 30, 2014: $31.88

Sept. 30, 2014: $31.05

Change: -2.6%

CDW, based in Vernon Hills, Ill., went public in mid-2013 and in September offered 15,000,000 new shares of common stock priced at $31.95 per share.

CDW (No. 8 on the CRN 2014 Solution Provider 500 list) reported revenue of $3.1 billion in its second quarter ended June 30, up nearly 12 percent from the same quarter last year. Net income was $86.6 million up a whopping 85.5 percent year-over-year.

Computer Sciences Corp.

CEO: Mike Lawrie

June 30, 2014: $63.20

Sept. 30, 2014: $61.15

Change: -3.2%

Reports surfaced in late September that CSC (No. 4 on the CRN 2014 Solution Provider 500 list) had been exploring its options for a leveraged buyout with multiple private equity firms, including Blackstone Group and Bain Capital.

CSC reported revenue of nearly $1.1 billion for its first fiscal quarter ended July 4, up more than 3 percent from the same quarter last year. But the Falls Church, Va.-based company's net income for the quarter fell 16 percent to $146 million.

ePlus Technology

CEO: Phillip Norton

June 30, 2014: $58.20

Sept. 30, 2014: $56.05

Change: -3.7%

Herndon, Va.-based ePlus Technology reported revenue reached $261.4 million for its first fiscal quarter ended June 30, up 5 percent year-over-year. The company, No. 36 on the CRN 2014 Solution Provider 500 list, reported net income of $9.5 million for the quarter, up almost 21 percent from the year-ago period.

CGI Group

CEO: Michael Roach

June 30, 2014: $35.48

Sept. 30, 2014: $33.77

Change: -4.8%

CGI (No. 9 on the CRN 2014 Solution Provider 500 list) reported revenue of $2.67 billion for its third fiscal quarter ended June 30, up nearly 4 percent from the same quarter last year. The Montreal-based company said quarterly net income grew more than 26 percent year-over-year to $225.1 million.

Unisys Corp.

CEO: J. Edward Coleman

June 30, 2014: $24.74

Sept. 30, 2014: $23.41

Change: -5.4%

CEO Ed Coleman said Oct. 6 that he would step down effective Dec. 1, news that comes on the heels of multiple quarters of declining revenue and earnings. Since that announcement occurred after Sept. 30, our analysis doesn't factor in investor reaction to the news.

Blue Bell, Pa.-based Unisys (No. 17 on the CRN 2014 Solution Provider 500 list) reported revenue of $806.4 million for its second quarter ended June 30, down 6 percent from the same quarter last year. The company reported a loss of $12.1 million for the quarter, compared to net income of $20.4 million one year earlier.

Tech Data Corp.

CEO: Robert Dutkowsky

June 30, 2014: $62.52

Sept. 30, 2014: $58.86

Change: -5.9%

Distributor Tech Data has been dedicating an increasing amount of resources to its TDCloud business unit that helps VARs develop and sell cloud-based IT solutions. In August the Clearwater, Fla.-based company appointed long-time executive Stacy Nethercoat to manage the cloud operations.

Tech Data reported revenue of $6.8 billion for its second quarter ended July 31, up more than 8 percent from last year's second quarter. Net income for the quarter rose 168 percent year-over-year to $39.3 million.

Avnet

CEO: Rick Hamada

June 30, 2014: $44.31

Sept. 30, 2014: $41.50

Change: -6.3%

Last month Avnet Technology Solutions global president Phil Gallagher said he was stepping down after more than five years in the job and 31 years at the Phoenix-based distributor. The company said Gallagher was leaving to focus on new career opportunities.

Avnet reported sales of $7.05 billion for its fourth fiscal quarter ended June 28, up 7 percent from the same quarter one year ago. Net income for the quarter grew nearly 48 percent year-over-year to $186.3 million.

PCM

CEO: Frank Khulusi

June 30, 2014: $10.66

Sept. 30, 2014: $9.77

Change: -8.3%

PCM (No. 27 on the CRN 2014 Solution Provider 500 list) had been a rumored potential takeover target by solution provider Zones. But in August Zones CEO Murray Wright said his company was definitely not pursuing a takeover of its channel rival.

El Segundo, Calif.–based PCM reported sales of $339.6 million for its second quarter ended June 30, down more than 4 percent from the same quarter one year earlier. Net income took an even bigger fall, almost 64 percent year-over-year, to $1.15 million.

Arrow Electronics

CEO: Michael Long

June 30, 2014: $60.41

Sept. 30, 2014: $55.35

Change: -8.4%

Distributor Arrow reported revenue of nearly $5.7 billion for its second quarter ended June 28, up 7 percent from the same quarter last year. The Englewood, Colo.-based company's second quarter net income grew more than 42 percent year-over-year to $127.9 million.

During the earnings call with financial analysts, Arrow executives were bullish on the second half of the year as the company expands sales of software and services, shifting away from its server-heavy product portfolio.

Cognizant

CEO: Francisco D'Souza

June 30, 2014: $48.91

Sept. 30, 2014: $44.77

Change: -8.5%

Cognizant has made a couple of acquisitions in recent months that strengthens its presence in the healthcare and life sciences markets. The acquisition of healthcare IT provider TriZetto was announced Sept. 18 while the acquisition of Cadient Group, a digital marketing company in Life Sciences, was announced Oct. 7 (after the period covered by our analysis).

Cognizant (No. 10 on the CRN 2014 Solution Provider 500 list) reported revenue of $2.52 billion in its second quarter ended June 30, up 16.5 percent from the same period one year before. Net income grew 24 percent to $371.9 million. In August the Teaneck, N.J.-based company expanded its stock repurchase program to $2 billion.

ScanSource

CEO: Mike Baur

June 30, 2014: $38.08

Sept. 30, 2014: $34.59

Change: -9.2%

ScanSource, the Greenville, S.C.-based distributor of specialty technology products, has been taking steps to expand globally. Recently the company acquired the Brazilian distributor Network1 and announced plans to acquire the U.K.-based Imago Group.

ScanSource reported revenue of $758.1 million for its fourth fiscal quarter ended June 30, up more than 6 percent from the same quarter one year ago. The distributor reported net income of $27.1 million for the quarter compared to a $13.3 million net loss one year ago.

Synnex Corp.

CEO: Kevin Murai

June 30, 2014: $72.85

Sept. 30, 2014: $64.63

Change: -11.3%

Synnex reported revenue of $3.54 billion for its third quarter ended Aug. 31, up more than 29 percent from last year's third quarter. The distributor's executives attributed the growth to business generated by the Windows XP support expiration and the company's data center build-out business.

But net income for the third fiscal quarter was down 3.5 percent year-over-year to $45 million.

Ingram Micro

CEO: Alain Monie

June 30, 2014: $29.21

Sept. 30, 2014: $25.81

Change: -11.6%

Distributor Ingram Micro is expanding its vertical market coverage into retail and finance, the company said at its One Ingram Micro event in Las Vegas last month, and is putting more focus on its unified communications and collaboration product portfolio.

Ingram Micro, based in Santa Ana, Calif., reported sales of $10.9 billion for its second quarter ended June 28, up almost 6 percent from the same quarter one year earlier. But net income for the quarter fell more than 27 percent to $50.6 million.

Systemax

CEO: Richard Leeds

June 30, 2014: $14.37

Sept. 30, 2014: $12.47

Change: -13.2%

Systemax, based in Port Washington, N.Y., reported sales of $831.1 million in the second quarter, up more than 3 percent from the same period one year before. Systemax (No. 19 on the CRN 2014 Solution Provider 500 list) reported a net loss of $6.2 million for the quarter, slightly more than the $6.1 million loss reported in the same quarter year-over-year.

Perficient

CEO: Jeffrey Davis

June 30, 2014: $19.47

Sept. 30, 2014: $14.99

Change: -23.0%

Perficient (No. 66 on the CRN 2014 Solution Provider 500 list) reported revenue of $116.7 million for its second quarter ended June 30, up 24 percent from the same quarter one year earlier. That includes a 22 percent gain in services-related revenue to $98.3 million.

Net income for the St, Louis-based solution provider, which has been pursuing an aggressive acquisition strategy, soared 40 percent year-over-year to nearly $6.4 million.

Insight Enterprises

CEO: Kenneth Lamneck

June 30, 2014: $30.74

Sept. 30, 2014: $22.63

Change: -26.4%

In July Insight Enterprises (No. 14 on the CRN 2014 Solution Provider 500 list) named Harish Krishnamurthy vice president of cloud services to drive the Tempe, Ariz.-based company's cloud strategy.

For its second quarter ended June 30 Insight reported sales of $1.42 billion, unchanged from the same quarter one year earlier. Net earnings were up 3 percent to $27.2 million.

Ciber

CEO: David Peterschmidt

June 30, 2014: $4.94

Sept. 30, 2014: $3.43

Change: -30.6%

Ciber announced a $24 million restructuring plan in late July that the company (No. 38 on the CRN 2014 Solution Provider 500 list) said would move it toward sustainable growth and profit.

The Greenwood Village, Colo.-based solution provider outlined the plan as it reported sales of $214.6 million for its second quarter ended June 30, down 3 percent from the same period one year earlier. The company reported a loss of $5.5 million for the quarter compared to a $1.8 million loss in the same quarter one year earlier.