CDW Eyes Acquisitions As Revenue, Earnings Increase

CDW earned $73.1 million on sales of $1.63 billion, compared to the year-ago quarter results of $67.1 million and $1.54 billion, for the Vernon Hills, Ill.-based solution provider. Diluted earnings per share were 91 cents, up 11 cents from the same quarter last year. The results topped analysts' earnings estimates by 12 cents per share, according to Thomson Financial/First Call.

John Edwardson, chairman and CEO, said CDW is talking with acquisition targets but sellers are asking for too much money.

"As we look at least at the public companies, none of [their market capitalizations] concerns me. What does concern me is the unrealistic nature of what their businesses are worth to CDW. Everybody believes we can run their business better than they can and they want most of that value to go to their shareholders," Edwardson said. "Given where we are and where want to be, we will spend a lot of time looking [at acquisitions]. Sooner or later, we will find the right combination."

Added Harry Harczak, executive vice president, "Our view hasn't changed in terms of finding something that can deliver market share gain or be additive to the business. We would look at something that adds a new customer base or a product set or a geographic reach, which could include in the [United] States or out of the States. We would look for things around those areas."

Edwardson added that CDW needs another $1.5 billion in revenue from its new Las Vegas distribution center to reach peak productivity from the facility.

In the quarter, corporate sales increased 3.3 percent to $1.11 billion, while public sector sales increased 12.6 percent to $521.6 million. Product categories that achieved the strongest-year-over-year growth were memory (15.4 percent), notebooks and accessories (11 percent), video (9.3 percent), and input devices (8.8 percent), according to the company. Printers were the only category that declined in sales, down 0.7 percent.

Software accounted for 17 percent of overall sales, data storage devices, desktops and services, and notebooks and accessories accounted for 13 percent each.

Notebook unit volume increased 17.5 percent and the average selling price fell 4.4 percent. Desktop and server unit volume increased 1.2 percent and the average selling price rose 0.9 percent.