Tech Data Partners Wary
Last week, Tech Data reported a $155.5 million loss for the second fiscal quarter and its search to replace Steve Raymund as CEO approached the seven-month mark. Combined with admitted challenges in its European operations, some VARs are concerned the distractions could trickle down to them.
One solution provider, who requested anonymity, said the impending CEO change, coupled with the departures of other executives and the possibility of even more departures to come, has clouded the company's direction internally.
"My [sales rep] isn't fighting for me like he used to. They're not putting in the time if they don't feel they will definitely get the business," the VAR said.
In the past month, Tech Data lost its senior vice president of sales, Tom Ducatelli, and its vice president of software product marketing, Tamra Muir. Ducatelli has not been replaced, but Tech Data announced last week at its TechSelect show in Chicago that Stacy Nethercoat will replace Muir as head of the Clearwater, Fla.-based distributor's software business.
Another VAR, who also requested anonymity, said disruption is likely if more Tech Data veterans leave as the new CEO brings in his own team. "I wish the big shoe would drop [and the new CEO was announced]," the solution provider said.
Several sources close to Tech Data said an announcement could still be a couple of weeks away.
"We've met with many talented individuals over the last several months, narrowing the slate of candidates to a select few," said Raymund, who plans to retain his chairman title.
When asked if he felt the company's recent financial results might have made it more difficult to find a successor, Raymund said: "We've had a crop of some strongly qualified and interested candidates, [so] I don't think so."
Ken Lamneck, Tech Data's president of the Americas, said the distributor continues to be focused on VARs and the CEO search is not a distraction.
"Starting at the top, it's been an orderly transition. No surprises. There are no significant changes there," he said.
"The new CEO will put his attention on understanding all aspects of our business out of the chute. Europe is where we need the most attention. But we're in pretty stable condition," Lamneck said. "The couple of [personnel] changes we've had is more a function of having such low turnover for five or six years, and now the market is expanding, so there's more [turnover happening]." Lamneck said Tech Data continues to invest in solution providers. For example, the company is hiring more sales resources. "We're pushing hard on that," he said. "We've added quite a few people over the past few quarters. If anyone is looking for feedback on service levels, that's being addressed."
The solution providers' concerns come at a critical juncture for Tech Data. The distributor's Americas sales increased 6 percent in the second fiscal quarter ended July 31, a performance better than its European operations but below competitors Ingram Micro and Synnex for the same region. Historically conservative, Tech Data is walking away from less profitable business but could be losing market share in the process, solution providers said.
But some TechSelect members said Tech Data is taking the right approach.
"Those solution providers complaining are probably looking for special pricing on every deal. Tech Data shouldn't be doing that," said Jay Tipton, vice president of Technology Specialists, a solution provider in Fort Wayne, Ind.
"If I wasn't seeing any value, I would not be here as a business owner. I think there will be a fast turnaround of the ship. I have that much confidence in Tech Data," said Jay Kishor, president of California Integrated Solutions, Phillips Ranch, Calif., and a TechSelect Council member.
Tech Data's shares fell just 8 cents to $34.74 last Wednesday after the earnings announcement, but that was down from $36.75 before it announced preliminary results Aug. 2.
"Clearly, Tech Data will right the ship at some point, but the timing remains elusive," said Brian Alexander, senior vice president of equity research, technology distribution, at Raymond James and Associates.
TechSelect solution providers initially hoped Raymund would attend last week's conference in Chicago in order to fete him for his career achievements at the company, but scheduling conflicts -- such as the company's earnings call last Wednesday -- dashed any party plans.
"Well, I'm not feeling very celebratory at the moment," Raymund said after the earnings call.