The Best And Worst Channel Company Stocks Of The First Half Of 2016

Channel Stocks: Gainers And Losers

In the first half of this year, 16 of the 25 publicly traded solution providers and distributors on our watch list saw the price of their stocks increase – some by pretty impressive double-digit amounts – while nine recorded declines.

How does that compare to the stock markets overall? For the first six months of the year, the Dow Jones Industrial Average rose just under 2.9 percent. But the Nasdaq fell 3.29 percent.

Here's a look at which companies' stocks did well in the first six months of 2016, and which did not.

Computer Sciences Corp.

CEO: Mike Lawrie

Dec. 31, 2015: $32.68

June 30, 2016: $49.65

Change: +51.93%

Just six months after spinning off its public sector business, CSC struck a deal in May with Hewlett-Packard Enterprise to merge with that company's Enterprise Services operations. The merger, expected to be completed early next year, will create a $26 billion IT infrastructure, services and solutions behemoth with more than 5,000 clients in 70 countries.

The announcement caused CSC's stock to rocket from approximately $35 per share to around $50, about where it ended on June 30.

CSC is No. 8 on the CRN Solution Provider 500.

Black Box Network Services

CEO: E.C. Sykes

Dec. 31, 2015: $9.53

June 30, 2016: $13.08

Change: +37.25%

In February, Black Box Network Services named E.C. Sykes as its CEO following the resignation of Michael McAndrew. In May, despite reporting that the company's sales for fiscal year 2016 (ended March 31) fell 8 percent amid a difficult sales restructuring, Sykes was optimistic about the company's future. Apparently, stockholders agreed given the sharp increase in the company's stock price.

In April, the company, No. 37 on the CRN Solution Provider 500, acquired Cloudium, a privately held Irish firm that specializes in developing desktop virtualization hardware and software.

ManTech International

CEO: George Pedersen

Dec. 31, 2015: $30.24

June 30, 2016: $37.82

Change: +25.07%

Despite a series of difficult years, federal government solutions provider ManTech is finding traction again this year with the government's plans to increase spending in cybersecurity, communications and other areas. Executives said a two-year budget agreement between the White House and Congress had raised federal spending limits and eliminated uncertainty around a number of federal programs.

ManTech is No. 29 on the CRN Solution Provider 500.

Perficient

CEO: Jeffrey Davis

Dec. 31, 2015: $17.12

June 30, 2016: $20.31

Change: +18.63%

In April, in a bid to expand its digital transformation services, Perficient launched a full-service, 200-person digital agency division to better meet the needs of chief marketing officers. The operation is designed to go beyond traditional IT services and provide businesses with a range of support services in creative design, branding and search engine optimization, combined with back-end support for ecommerce and transactions.

The announcement followed the company's December acquisition of Enlighten, a 75-person digital marketing agency, for $12 million.

Perficient is No. 61 on the CRN Solution Provider 500.

ScanSource

CEO: Mike Baur

Dec. 31, 2015: $32.22

June 30, 2016: $37.11

Change: +15.18%

In May, distributor ScanSource reported that revenue in its fiscal 2016 third quarter, which ended March 31, was $798.4 million, up 5 percent from $763.2 million in the same period one year earlier. Net income rose 8 percent year over year, to $14 million from $12.9 million.

On Aug. 8, ScanSource surprised the channel when it announced an agreement to buy master agent Intelisys Communications for $83.6 million, plus earn-outs, in a deal that will bring more recurring-revenue telecom and cloud service opportunities to its traditional communications resellers. That pushed up the company's stock to over $42 a share that day.

Ingram Micro

CEO: Alain Monie

Dec. 31, 2015: $30.38

June 30, 2016: $34.78

Change: +14.48%

In February, distributor Ingram Micro announced it would be acquired by Chinese Logistics firm Tianjin Tianhai for $6 billion. The companies expect to close the deal by the end of this year. The acquisition price works out to $38.90 per share.

Ingram Micro's shares, which were trading at under $30 before the announcement, spiked to $36.65 after the deal was announced, before settling back.

In April, Ingram Micro said it had acquired Ensim, a provider of services for automating, orchestrating and provisioning cloud business applications. It was Ingram's sixth acquisition in as many months.

Arrow Electronics

CEO: Michael Long

Dec. 31, 2015: $54.18

June 30, 2016: $61.90

Change: +14.25%

Arrow has been shifting its product and solutions portfolio to put greater emphasis on software, especially in such key areas as security and big data.

For the first half (which ended July 2) of the distributor's 2016 fiscal year, Arrow reported sales of $11.04 billion, up nearly 6 percent from $10.45 billion in the first half of fiscal 2015.

PCM

CEO: Frank Khulusi

Dec. 31, 2015: $9.93

June 30, 2016: $11.14

Change: +12.19%

PCM was on an acquisition spree in 2015, including its $14 million purchase of Systemax's North American business-to-business division in December. This year, that's paying off as the company reports robust revenue growth.

For the first half of 2016, PCM, No. 28 on the CRN Solution Provider 500, reported sales of $1.08 billion, up more than 39 percent from $774.8 million in the same period in 2015. Net income soared to $7.6 million, compared to a net loss of $3.3 million in the same period last year.

Datalink

CEO: Paul Lidsky

Dec. 31, 2015: $6.80

June 30, 2016: $7.50

Change: +10.29%

Datalink, No. 45 on the CRN Solution Provider 500, has been growing its consulting and managed services practices in the last two years as it transforms itself into a strategic services provider. The goal is to have less reliance on its legacy lines of business, such as its slow-growing storage system business.

Sales for the first six months of 2016 were $363.8 million, up 1.6 percent from $358 million in the first half of 2015. Net income for the period was $3.4, million compared to $647,000 in the first six months of last year.

Accenture

CEO: Pierre Nanterme

Dec. 31, 2015: $104.50

June 30, 2016: $113.29

Change: +8.41%

Systems integrator Accenture, No. 2 on the CRN Solution Provider 500, has been pursuing an aggressive acquisition strategy over the last 18 months.

This year, the company has pursued a strategy of acquiring smaller, narrowly focused companies. In January, Accenture bought CRMWaypoint, a Netherlands-based partner of cloud CRM application vendor Salesforce.com. It followed that up one day later with the acquisition of Formicary, a capital technology markets consulting firm.

In April, Accenture acquired a majority stake in the Japanese digital agency IMJ Corp. And in May, it struck a deal to buy OPS Rules, a consulting company that uses data science to solve complex business problems in retail, life sciences, high-tech and industrial markets. Finally, in June, Accenture expanded the capabilities of its recently launched cybersecurity unit by acquiring Israeli security technology company Maglan.

Tech Data Corp.

CEO: Robert Dutkowsky

Dec. 31, 2015: $66.38

June 30, 2016: $71.85

Change: +8.24%

In March, distributor Tech Data hired a 32-year IBM veteran to serve as the company's first-ever chief operating officer. Rich Hume's job is to identify sales, logistics and product management best practices in specific company operations and get them widely adopted throughout the organization.

In May, the company unveiled a 100-person security and information management practice that will focus on emerging technologies in such areas as intrusion prevention systems, security information management and analytics.

CGI Group

CEO: Michael Roach

Dec. 31, 2015: $40.03

June 30, 2016: $42.71

Change: +6.69%

In April, technology consultant CGI, No. 18 on the CRN Solution Provider 500, said it had completed a nearly $43 million restructuring program and was focused on growing its recurring revenue business in the second half of its fiscal 2016 year (which ends Sept. 30).

For GCI's third fiscal quarter, which ended June 30, the Montreal-based company reported revenue of $2.67 billion Canadian (U.S. $2.06 billion), up more than 4 percent from $2.56 billion Canadian (U.S. $1.98 billion) in the same quarter one year earlier. Net earnings for the quarter were $273.8 million Canadian (U.S. $212 million), up more than 6 percent from $257.2 million Canadian (U.S. $199.2 million) one year earlier.

Synnex Corp.

CEO: Kevin Murai

Dec. 31, 2015: $89.93

June 30, 2016: $94.82

Change: +5.44%

Distributor Synnex unveiled a plan in March to cut more than 800 customer care jobs, close three U.S. delivery centers and offshore some of that work to lower-cost locations in an effort to reduce expenses. That followed news that revenue in the Fremont, Calif.-based company's fiscal 2016 first quarter had dropped 2.4 percent, marking the fourth consecutive quarter of declining sales.

PC Connection

CEO: Timothy McGrath

Dec. 31, 2015: $22.64

June 30, 2016: $23.80

Change: +5.12%

PC Connection fortified its Microsoft software volume transaction business in May when it acquired Softmart, a $200 million solution provider with robust hardware, cloud and Office 365 practices. Softmart held Microsoft's coveted Licensing Solution Provider (LSP) status, making it – like PC Connection – one of only a handful of North American Microsoft partners authorized to handle software volume licensing transactions.

Merrimack, N.H.-based PC Connection is No. 21 on the CRN Solution Provider 500.

Insight Enterprises

CEO: Kenneth Lamneck

Dec. 31, 2015: $25.12

June 30, 2016: $26

Change: +3.5%

For the first half of 2016, Insight Enterprises reported sales of $2.63 billion, down 1 percent from $2.64 billion in the first six months of 2015. However, net earnings for the six months grew a solid 15 percent, to just under $42 million from $36.5 million in the first half of 2015.

Insight Enterprises, based in Tempe, Ariz., is No. 15 on the CRN Solution Provider 500.

Syntel

CEO: Nitin Rakesh

Dec. 31, 2015: $45.25

June 30, 2016: $45.26

Change: +0.02%

For the first half of 2016, Syntel reported revenue of $487.4 million, up nearly 6 percent from $460.4 million in the first half of 2015. Net income for the six-month period was $111.8 million, up 11 percent from $100.6 million one year earlier.

Syntel, based in Troy, Mich., is No. 38 on the CRN Solution Provider 500.

Systemax

CEO: Larry Reinhold

Dec. 31, 2015: $8.60

June 30, 2016: $8.53

Change: -0.81%

Systemax, the first company on our index to see its stock price decline in the first half of 2016, has been undergoing significant changes in the last year, including the closing of its retail business and the elimination of as many as 500 jobs in a cost-cutting effort.

In March, the company, No. 26 on the CRN Solution Provider 500, said it was elevating chief financial officer Larry Reinhold to CEO while then-CEO Richard Leeds became executive chairman. Leeds was given the task of helping guide the company's strategic direction and overseeing the development of new products and services.

For the first six months of 2016, Systemax reported sales of $850.6 million, down 12 percent from $966.2 million in the first half of 2015. Meanwhile, the company reported a $3.1 million loss from continuing operations, compared to a $38.5 million loss in the first half of 2015.

CACI International

CEO: Kenneth Asbury

Dec. 31, 2015: $92.78

June 30, 2016: $90.41

Change: -2.55%

In January, CACI, a leading solution provider in the federal government and national defense market, was awarded a prime position on a $6-billion multiple-award contract to provide information technology support to the U.S. Defense Intelligence Agency. In March, the company was awarded a prime position on an $809 million, five-year contract to support the Naval Supply Systems Command Business Systems Center.

For its fiscal 2016 third quarter CACI, No. 17 on the CRN Solution Provider 500, reported revenue of $977.3 million, up nearly 20 percent from $817.8 million in the same quarter one year earlier. Meanwhile, net income was $34 million, up 17 percent from $29.1 million.

Cognizant Technology Solutions

CEO: Francisco D'Souza

Dec. 31, 2015: $60.02

June 30, 2016: $57.24

Change: -4.63%

Cognizant is another solution provider that has been active on the acquisition front this year.

In January, Cognizant, No. 7 on the CRN Solution Provider 500, bought KBACE Technologies, a Nashua, N.H.-based Oracle partner that serves Oracle cloud application customers. And in April, Cognizant bought a 49-percent stake in ReD Associates, a consulting firm that helps companies apply behavioral insights to business and IT strategy.

For the six months ending June 30, Cognizant reported revenue of $6.57 billion, up nearly 10 percent from just under $6 billion in the first half of 2015. But higher operating expenses took a bite out of earnings, with net income dropping nearly 14 percent to $693.6 million, compared to $803 million in the same period a year earlier.

CDW

CEO: Thomas Richards

Dec. 31, 2015: $42.04

June 30, 2016: $40.08

Change: -4.66%

For the first half of 2016, CDW reported sales of $6.78 billion, up 11.7 percent from $6.07 billion in the first half of 2015. Net income was $195.3 million, up nearly 20 percent from $162.9 million one year before.

In May, CDW, No. 5 on the CRN Solution Provider 500, announced a $750 million increase in its share repurchase program and declared a cash dividend of $0.1075 per share, actions that generally shore up or boost a company's stock price.

Avnet

CEO: Bill Amelio

Dec. 31, 2015: $42.84

June 30, 2016: $40.51

Change: -5.44%

For Avnet's 2016 fiscal year, which ended July 2, the distributor reported sales of $26.22 billion, down more than 6 percent from $27.92 billion in fiscal 2015. Meanwhile, net income declined more than 11 percent to $506.5 million from $571.9 million.

In April, Avnet said it would cut $25 million in employee costs and other expenses following a lackluster financial report for the third quarter that included a significant drop in demand for data center hardware and software.

On July 11, after the period covered in this analysis, CEO Rick Hamada stepped down after more than five years in the job. He was replaced on an interim basis by former Lenovo CEO Bill Amelio while the company searched for a permanent replacement.

ePlus Technology

CEO: Mark Marron

Dec. 31, 2015: $93.26

June 30, 2016: $81.79

Change: -12.3%

ePlus is another company that has undergone a management change since June 30. In late July, Phil Norton stepped down after serving 23 years as CEO of solution provider ePlus, No. 34 on the CRN Solution Provider 500. Norton was replaced by longtime chief operating officer Mark Marron.

For its fiscal 2017 first quarter (which ended June 30) ePlus reported sales of $291.5 million, up 11.5 percent from $261.5 million from last year's first quarter. Meanwhile, net earnings were $10.7 million, up 21 percent from $8.8 million.

SS&C Technologies

CEO: William Stone

Dec. 31, 2015: $34.13

June 30, 2016: $28.08

Change: -17.73%

On May 25, SS&C Technologies, a provider of IT solutions and services for the financial and investment management industry, announced a two-for-one stock split effective June 27. So, the Dec. 31, 2015 closing price has been adjusted from the original $68.27 to $34.13.

For the first half of 2016, SS&C reported revenue of $697.2 million, up nearly 67 percent from $418.5 million in the first half of 2015. But net income for the six-month period was only $35.2 million, down 46 percent from $65.4 million last year.

Unisys

CEO: Peter Altabef

Dec. 31, 2015: $11.05

June 30, 2016: $7.28

Change: -34.12%

Unisys share prices plunged 28 percent on March 9, a day after the company, No. 19 on the CRN Solution Provider 500, said it would seek $150 million in debt financing to help cover cost-reduction and savings initiatives, whittle down its current debt load and invest in new services and technologies.

For the first six months of 2016, Unisys reported revenue of $1.42 billion, down nearly 5 percent from $1.49 billion in the first half of 2015. Meanwhile, the company reported a net loss of $18.3 million, compared to the $101.4 million loss reported in the first half of 2015.

Ciber

CEO: Michael Boustridge

Dec. 31, 2015: $3.51

June 30, 2016: $1.50

Change: -57.26%

Ciber, No. 43 on the CRN Solution Provider 500, has struggled to turn its business around in 2016 and the company's stock price has suffered a steep decline – the biggest on our watch list.

In May, after reporting poor results for its first fiscal quarter, which ended March 31, Ciber said it would reduce its employee roster as part of its goal of cutting $5 million from its sales, general and administrative costs by the end of this year.

The company also has been divesting itself of non-strategic operations and focusing on its core IT staffing, implementation, application modernization, consulting and managed services businesses. In June, Ciber announced a deal to sell its Netherlands business to Milwaukee-based ManpowerGroup for $25 million.

For the first six months of 2016 Ciber reported revenue of just under $341 million, down nearly 15 percent from $399.9 million in the first half of 2015. The company reported a $148.4 million net loss for the six months, including restructuring costs, goodwill impairment and other charges, compared to net income of $5.3 million in the first half of 2015.