Tech Data Aims To Redouble Efforts In Niche Markets, Improve Efficiencies

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Tech Data wants to drive sales in niche markets and increase internal efficiencies as ways to shore up revenue, said Tech Data CEO Steve Raymund, after the company reported its fourth-quarter earnings results.

To offset the impact of a slow industrywide turnaround, Tech Data plans to leverage sales and marketing resources in its specialized business units (SBUs) to "better serve, better penetrate and better support" solution providers in niche areas, such as enterprise, computer supplies, wireless networking, components and software licensing, Raymund said.

"There are areas of the business exhibiting some growth, however anemic," said Raymund. "Therefore, it behooves us to redouble our efforts to be successful in those niches in order to offset some of the erosion elsewhere."

Tech Data has not lost market share in any of these categories, Raymund said.

The distributor's other main focus for the year is to strengthen its internal efficiencies and increase customer service levels, the company said. Raymund wants to see improvements in key business indicators, such as balance sheet management, inventory levels, fill rates to customers, accessibility to salespeople, product deliverability and shipment accuracy.

"Tech Data runs pretty darn well, and there is more we could do," said Raymund. Tech Data is running close to "optimum performance" in the United States, so it has devoted the majority of its resources to building efficiencies in Europe, where it "lags by a pretty wide margin," he said.

Tech Data also said it plans to sell or close operations in Norway and one other country, to be named later. The company gained a presence in Norway through its acquisition of Computer 2000 in July 1998. Since then, the distributor has been losing "surprising sums of money," which has been "quite painful," Raymund said.

"It's just a country we could never figure out how to make money in, primarily because the market there is so small and the number of distributors were too great to allow anybody to do very well unless somebody finally blinked, which we did," said Raymund.

Tech Data wouldn't name the other country scheduled to be dropped from its line card, but Raymund said it represents a "very small and negligible" market.

Tech Data doesn't expect any short-term slowdown in sales resulting from a merger between Hewlett-Packard and Compaq Computer. "I expect things to get better from here, because at last the uncertainty is behind us," Raymund said. "There will be some bumps along the road. But in general, I'm expecting to see a re-energized HP."

For the fourth quarter ended Jan. 31, Tech Data beat analysts' expectations but saw earnings fall 32 percent.

The distributor earned $36.5 million, or 63 cents per diluted share, in its fourth quarter, compared with $52.7 million, or 92 cents per diluted share, in the year-ago quarter. First Call had projected earnings of 61 cents per share.

Sales for the quarter were down 22 percent to $4.16 billion, compared with $5.32 billion for the same period last year.

Tech Data expects first-quarter fiscal 2003 revenue, excluding charges, to be between $3.7 billion and $3.9 billion, with net income between $32 million and $35 million, or 55 cents to 60 cents per diluted share. First Call had been projecting earnings of 58 cents per share for the first quarter.

Tech Data's stock closed up more than 9 percent Thursday to $47.20 per share.

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