The Best And Worst Channel Company Stocks Of Q1 2017

Channel Stocks: Gainers And Losers

The stock markets were on a roll following the November election and through much of the first quarter – what some called the "Trump bull market." The Dow Jones Industrial Average was up 4.56 percent in the first quarter while the NASDAQ was up an impressive 9.82 percent.

How did publicly held solution provider companies fare? It was a nearly even split with 14 of the companies on our channel watch list recording stock price gains in Q1 and 13 seeing declines – several by hefty double-digit percentages.

Here's a look at who was up and who was down for the quarter, starting with companies with the biggest gains in share price, based on stock closing prices on Dec. 30, 2016 and March 31, 2017.

Reflecting the ever-changing makeup of the IT industry in 2016, two companies previously on this list have been dropped because they were acquired: Datalink, which was acquired by Insight Enterprises; and Ingram Micro, which was acquired by HNA. New to the Channel Stocks watch list are Conduent, CSRA, Presidio and West Corp.

Note: On April 3 CSC merged with Hewlett Packard Enterprise's enterprise service organization to create DXC. This analysis includes the final trading price for CSC stock on March 31 and our channel stock analysis for the 2017 second quarter will replace CSC with DXC.

Systemax

CEO: Larry Reinhold

Dec. 30, 2016: $8.77

March 31, 2017: $11.09

Change: +26.45%

Systemax underwent some significant changes in 2016, including closing its retail business and eliminating as many as 500 jobs to cut costs.

In February Systemax, No. 26 on the CRN Solution Provider 500, reported that for all of 2016 revenue declined 9.4 percent to $1.68 billion from more than $1.85 billion in 2015. But the company narrowed its net loss from continuing operations to $7.9 million in 2016 from $48.3 million in 2015. It also reported a $24.7 million net loss from discontinued operations in 2016 compared to a $51.5 million net loss from discontinued operations in 2015.

PCM

CEO: Frank Khulusi

Dec. 30, 2016: $22.50

March 31, 2017: $28.05

Change: +24.67%

On Jan. 2, 2017, PCM acquired $4.1 million Microsoft Gold Partner Stratiform to boost its service capabilities around Azure, Office 365 and the Enterprise Mobility Suite.

PCM, No. 28 on the CRN Solution Provider 500, reported in February that net sales in 2016 hit $2.25 billion, up 35 percent from $1.66 billion in 2015. Net income for the year was $17.6 million compared to a $18.3 million net loss in 2015.

SS&C Technologies

CEO: William Stone

Dec. 30, 2016: $28.60

March 31, 2017: $35.40

Change: +23.78%

SS&C, No. 36 on the CRN Solution Provider 500, began 2017 fresh off its $88.5 million acquisition of Conifer Financial Services, a move the company said would allow it to provide a wider array of services to outsourced CIO portfolios.

In February SS&C reported that revenue for all of 2016 was $1.48 billion, up 48 percent from $1.00 billion in 2015. Net income soared more than three-fold to $131.0 million from $42.9 million in 2015.

ePlus Technology

CEO: Mark Marron

Dec. 30, 2016: $115.20

March 31, 2017: $135.05

Change: +17.23%

On Feb. 2 ePlus Technology, No. 34 on the CRN Solution Provider 500, announced plans for a two-for-one stock split. That split was effective April 3, after the time period covered by this analysis, but will be factored into future channel stock rankings.

Also on Feb. 2 ePlus Technology said that revenue for its fiscal 2017 third quarter (ended Dec. 31, 2016) was $326.7 million, up 9.4 percent from $298.6 million in the same quarter one year earlier. Net earnings for the third quarter were $12.6 million, up 22.5 percent from $10.3 million one year earlier.

Computer Sciences Corp.

CEO: Mike Lawrie

Dec. 30, 2016: $59.42

March 31, 2017: $69.01

Change: +16.14%

CSC struck a deal in May 2016 with Hewlett-Packard Enterprise to merge with HPE's Enterprise Services operations, creating the new company DXC Technology, a $26 billion IT infrastructure, services and solutions behemoth with more than 5,000 clients in 70 countries.

That deal was completed on April 3 after the period covered in this analysis. Trading of DXC Technology stock began that day, and trading of CSC shares ended.

CSC was No. 8 on the CRN Solution Provider 500. But DXC, following the merger, is likely to garner a higher ranking.

In February CSC and HPE announced the executives who would manage the new DXC, drawing from the management ranks of both CSC and HPE Enterprise Services.

Presidio

CEO: Bob Cagnazzi

March 10, 2017: $13.50

March 31, 2017: $15.48

Change: +14.67%

Solution provider powerhouse Presidio, No. 22 on the CRN Solution Provider 500, went public on March 10, selling 16.7 million shares on the NASDAQ exchange and raising $233 million. The company planned to use the funds to pay down the company's roughly $1 billion debt and strengthen its balance sheet.

Conduent

CEO: Ashok Vemuri

Jan. 3, 2017: $14.90

March 31, 2017: $16.78

Change: +12.62%

Conduent is the $6.4 billion business process outsource service provider created when Xerox was split into two companies at the beginning of 2017. The company's shares began trading Jan. 3.

In February the company announced financial results for the company's fourth quarter and fiscal 2016, both ended Dec. 31, representing the company's operations while still part of Xerox Corp.

Revenue for all of 2016 was $6.41 billion, down 4 percent from $6.66 billion in 2015. The company reported a net loss of $983 million for 2016 compared to a $414 million net loss in 2015.

Revenue for the fourth quarter was $1.51 billion, down 12 percent from $1.73 billion in the same quarter one year earlier. The company reported a net loss of $951 million for the fourth quarter compared to a $5 million loss one year before.

Tech Data Corp.

CEO: Robert Dutkowsky

Dec. 30, 2016: $84.68

March 31, 2017: $93.90

Change: +10.89%

On Feb. 27 distributor Tech Data closed its $2.6 billion acquisition Avnet's Technology Solutions business, announced in September, in a deal that reshapes the value-added distribution landscape. Acquiring Avnet's $9.65 billion Technology Solutions business is expected to boost Tech Data's data center business, growing that operation's share of Tech Data's total revenue from 29 percent to 45 percent.

In March Tech Data reported that sales in fiscal 2017 (ended Jan. 31, 2017) were $26.23 billion, down 1 percent from $26.38 billion in fiscal 2016. Net income for fiscal 2017 was $195.1 million, down 27 percent from $265.7 million one year before.

CDW

CEO: Thomas Richards

Dec. 30, 2016: $52.09

March 31, 2017: $57.71

Change: +10.79%

In February CDW, No. 5 on the CRN Solution Provider 500, reported that sales for all of 2016 grew 7.6 percent to $13.98 billion from $12.99 billion in 2015. Net income for 2016 was $424.4 million, up 5.3 percent from $403.1 million in 2015.

Cognizant Technology Solutions

CEO: Francisco D'Souza

Dec. 30, 2016: $56.03

March 31, 2017: $59.52

Change: +6.23%

In late November, activist investor Elliott Management, which acquired a 4 percent stake in Cognizant, called on Cognizant to shake up its board of directors and buy back $2.5 billion in shares as part of what it called a value enhancement plan aimed at driving up share prices by 50 to 69 percent in 2017.

In February Cognizant, No. 7 on the CRN Solution Provider 500, reached an agreement with Elliott under which the solution provider promised to appoint three new directors to its board and create a three-person financial policy committee to assist and advise the board on issues relating to the company's operating plan and capital allocation policy.

The company also promised to invest more in new technology practices, target non-GAAP operating margins of 22 percent by 2019, and return $3.4 billion to shareholders in the next two years through share repurchases and dividends.

Connection

CEO: Timothy McGrath

Dec. 30, 2016: $28.09

March 31, 2017: $29.79

Change: +6.05%

In September Merrimack, N.H.-based PC Connection, No. 21 on the CRN Solution Provider 500, changed its name to "Connection" to better reflect its IT offerings, from data center and networking to software and security.

For its first quarter ended March 31, Connection reported sales of $670.6 million, up more than 17 percent from $572.4 million in the same quarter one year earlier. But net income in the quarter declined 18 percent to $7.4 million from $9.1 million one year before.

Arrow Electronics

CEO: Michael Long

Dec. 30, 2016: $71.30

March 31, 2017: $73.41

Change: +2.96%

Arrow Electronics president and CEO Mike Long said in February that the distributor had been authorized to carry Dell's enterprise products. He also said the distributor had closed on $350 million in annual business captured from other IT distributors.

For all of 2016 Arrow reported sales of $23.83 billion, up more than 2 percent from $23.28 billion in 2015. Net income in 2016 reached $522.8 million, up 5 percent from $497.7 million in 2015.

Accenture

CEO: Pierre Nanterme

Dec. 30, 2016: $117.13

March 31, 2017: $119.88

Change: +2.35%

In March Accenture, No. 2 on the CRN Solution Provider 500, said it would spend $900 million to retrain 200,000 technology-focused employees in emerging IT including cloud, robotics and artificial intelligence.

Throughout the quarter Accenture kept up its steady stream of acquisitions including European ServiceNow consulting firms Focus Group Europe and solid-serVision; iDefense Security Intelligence Services, a threat intelligence company; the federal services business of threat-detection company Endgame; and IT consulting firm InvestTech Systems Consulting.

Insight Enterprises

CEO: Kenneth Lamneck

Dec. 30, 2016: $40.44

March 31, 2017: $41.09

Change: +1.61%

On Nov. 7 Insight Enterprises, No. 15 on the CRN Solution Provider 500, reached an agreement to acquire Datalink for $11.25 per share or $258 million. Datalink, No. 45 on the CRN Solution Provider 500, was one of the channel's biggest pure-play data center solution providers and had sales of $547.8 million in the first nine months of 2016.

Insight Enterprises, a major Microsoft and Cisco channel partner based in Tempe, Ariz., completed the Datalink acquisition on Jan. 6. Insight said the acquisition strengthens its competitive position, through global scale and technical talent, in delivering on-premise and cloud data center solutions.

In February Insight reported that for all of 2016 sales grew 2 percent to $5.49 billion from $5.37 billion in 2015. Net income for the year was $84.7 million, up 12 percent from $75.9 million in 2015.

CGI Group

CEO: George Schindler

Dec. 30, 2016: $48.03

March 31, 2017: $47.93

Change: -0.21%

CGI, No. 18 on the CRN Solution Provider 500, began the year under new management. On September 8 CGI announced that president and chief operating officer George Schindler would become president and CEO effective Oct. 1, taking over for CEO Michael Roach who retired effective Sept. 30, the end of the company's fiscal year.

For its fiscal 2017 first quarter (ended Dec. 31, 2016), CGI reported sales of $2.68 billion Canadian (U.S. $1.98 billion), essentially flat with the fiscal 2016 first quarter. Net income for the most recent quarter was $275.7 million Canadian (U.S. $204.4 million), up 16 percent from $237.7 million Canadian (U.S. $176.3 million) one year before.

Perficient

CEO: Jeffrey Davis

Dec. 30, 2016: $17.49

March 31, 2017: $17.36

Change: -0.74%

Perficient has increasingly focused on digital transformation consulting services in the last year.

In January Perficient acquired RAS & Associates, a 40-man management consulting firm, in a move Perficient said would expand its service capabilities in such areas as systems integration, data reporting and analytics. The $9 million RAS provides consulting services in strategy, operations, and business processes.

For all of 2016, Perficient reported revenue of $487.0 million, up 3 percent from $473.6 million in 2015. But net income for the year decreased 11 percent to $20.5 million from $23.0 million. The annual results included an 11 percent year-over-year drop in fourth-quarter revenue to $119.6 million.

West Corp.

CEO: Tom Barker

Dec. 30, 2016: $24.76

March 31, 2017: $24.42

Change: -1.37%

On March 7 West Corp., No. 23 on the CRN Solution Provider 500, completed its acquisition of the cloud collaboration practice and assets from Vocus Group in Australia. West Corp. said the move would expand its position and capabilities throughout the Asia-Pacific region and make it one of the few global providers of Cisco's hosted Unified Communications stack.

For all of 2016, West Corp. reported revenue of $2.29 billion, up 0.5 percent from $2.28 billion in 2015. Net income in 2016 was $193.4 million, down 20 percent from $241.8 million in 2015.

ScanSource

CEO: Mike Baur

Dec. 30, 2016: $40.35

March 31, 2017: $39.25

Change: -2.73%

For its fiscal 2017 second quarter (ended Dec. 31, 2016) distributor ScanSource reported sales of $904.8 million, down 9 percent from $993.5 million in the second quarter of fiscal 2016. Net income for the quarter was $23.0 million, up 12 percent from $20.7 million one year earlier.

Avnet

CEO: Bill Amelio

Dec. 30, 2016: $47.61

March 31, 2017: $45.76

Change: -3.89%

Avnet completed the $2.6 billion sale of its Avnet Technology Solutions business to distributor Tech Data on Feb. 27 in a deal that reshapes the value-added distribution industry. The deal to sell the $9.65 billion TS business was announced in September.

In late January Avnet reported that in its fiscal 2017 second quarter (ended Dec. 31, 2016) sales grew 2.7 percent to $4.27 billion from $4.16 billion in the same quarter one year earlier. Net income for the quarter was down nearly 34 percent, however, to $103.2 million from $156.0 million one year before.

CACI International

CEO: Kenneth Asbury

Dec. 30, 2016: $124.30

March 31, 2017: $117.30

Change: -5.63%

In January CACI International, a leading IT services provider to the federal government, said it had been awarded a prime position on a $6 billion multiple-award contract to support the Defense Logistics Agency's Information Operations Office program offices and other Department of Defense agencies.

For its fiscal 2017 second quarter (ended Dec. 31, 2016) CACI, No. 17 on the CRN Solution Provider 500, reported revenue of $1.06 billion, up 27.3 percent from $830.4 million in the same quarter one year before. Net income was $42.4 million, up more than 39 percent from $30.5 percent one year ago.

Unisys

CEO: Peter Altabef

Dec. 30, 2016: $14.95

March 31, 2017: $13.95

Change: -6.69%

Unisys has been in turnaround mode in recent years and while it made progress in 2016 in its efforts to return to sales growth and profitability, the company, No. 19 on the CRN Solution Provider 500, still has work to do it 2017.

In January the company reported that for all of 2016 revenue declined 6.4 percent to $2.82 billion from $3.01 billion in 2015. But the company narrowed its losses to $47.7 million in 2016 from $109.9 million in 2015.

Synnex Corp.

CEO: Kevin Murai

Dec. 30, 2016: $121.02

March 31, 2017: $111.94

Change: -7.50%

In March Synnex announced that it had been named a strategic authorized North American distribution partner in the new Dell EMC Partner Program.

Also in March Synnex said that in its fiscal 2017 first quarter (ended Feb. 28. 2017) revenue grew 12.6 percent to $3.52 billion from $3.13 billion in the same quarter one year earlier. Net income for the quarter was $61.8 million, up more than 32 percent from $46.6 million one year before.

CSRA

CEO: Larry Prior

Dec. 30, 2016: $31.84

March 31, 2017: $29.29

Change: -8.01%

CSRA is the government IT services company formed in late 2015 through the combination of SRA International and the federal government business of Computer Science Corp.

In February CSRA reported that in its fiscal 2017 third quarter (ended Dec. 30, 2016) revenue increased 18.5 percent to $1.22 billion from $1.03 billion in the same quarter one year earlier. Net income for the quarter soared 151 percent to $128 million from $51 million one year before.

Syntel

CEO: Rakesh Khanna

Dec. 30, 2016: $19.79

March 31, 2017: $16.83

Change: -14.96%

Sytel, No. 38 on the CRN Solution Provider 500, began 2017 under new management. On Oct. 31 Syntel president and CEO Nitin Rakesh stepped down after two and a half years in the position and was replaced on an interim basis by Rakesh Khanna, the solution provider's chief operating officer.

For the first quarter ended March 31, Syntel reported revenue of $225.9 million, down 6.4 percent from $241.4 million in the first quarter of 2016. Net income for the quarter was $38.4 million, down nearly 28 percent from $53.1 million one year earlier.

ManTech International

CEO: George Pedersen

Dec. 30, 2016: $45.25

March 31, 2017: $34.63

Change: -18.04%

In February ManTech, No. 29 on the CRN Solution Provider 500, reported that revenue for all of 2016 was $1.60 billion, up 3,3 percent from $1.55 billion in 2015. Net income for the year was up more than 10 percent to $56.4 million from $51.1 million in 2015.

Ciber

CEO: Michael Boustridge

Dec. 30, 2016: $0.63

March 31, 2017: $0.40

Change: -36.51%

Ciber, No. 43 on the CRN Solution Provider 500, struggled to turn its business around in 2016, even hiring a consulting firm in October to help it explore strategic alternatives. Through 2016 and in the first quarter of 2017 the company sold off some its business operations, including operations in Europe and its Infor service practice, as it faced a March 31 deadline to pay off a $28.2 million Wells Fargo loan.

On March 17 CFO Christian Metzger said the solution provider's future was uncertain if it was unable to repay the Wells Fargo loan.

On April 10, after the period covered in this analysis, Ciber filed for Chapter 11 bankruptcy protection and entered into a "stalking horse" agreement for Capgemini to purchase Ciber's North America and India businesses for $50 million. Ciber's stock fell to $0.25 per share, and the New York Stock Exchange suspended trading of Ciber shares and began proceedings to delist the stock.

Black Box Network Services

CEO: E.C. Sykes

Dec. 30, 2016: $15.25

March 31, 2017: $8.95

Change: -41.31%

On Jan. 24 Black Box, No. 37 on the CRN Solution Provider 500, announced that Anthony Massetti, senior vice president and chief financial officer, had resigned due to personal reasons regarding his relocation to the Pittsburgh area as originally planned. The company said his resignation was "not related to any issues regarding financial disclosures or accounting matters."

On Jan. 31 Black Box reported that revenue in its fiscal 2017 third quarter (ended Dec. 31, 2016) was $210.4 million, down 5 percent from $222.5 million in the same quarter one year earlier. Net income for the quarter was $1.3 million, down 77 percent from $5.7 million one year before.

And on Feb. 15 the company announced a $0.12 per share quarterly cash dividend and said it would activate a common stock repurchase program.