Tech Data 1Q Profit Falls Despite Sales Gain

The Clearwater, Fla.-based distributor posted a profit of $9.9 million, or 18 cents per share, for the quarter ended April 30, down 23 percent from $12.9 million, or 23 cents per share, a year earlier. The company said it lost $8.8 million disposing of its business in the United Arab Emirates.

Tech Data's first-quarter sales totaled $5.4 billion, up 9.3 percent from $4.94 billion in the year-ago quarte.

Financial analysts had expected Tech Data to report earnings of 39 cents per share on sales of $5.36 billion.

"We continue to manage Tech Data for the long term, with a combination of the investments in IT systems, in our logistics centers, in our e-commerce capabilities, our investments in our sales force and our investment in marketing programs to better position the company," CEO Bob Dutkowsky said.

"You trade that off with some short-term profitability sometimes, and that's the right thing to do given Tech Data's position right now," he said. "The quarter could have been stronger in the short term had we not taken the charges for the U.A.E. exit, but it was the right thing to do in the long haul."

In the second quarter, Tech Data is negotiating to sell its business in Israel, which Dutkowsky called "another geography where we have a lot of capital tied up and we don't believe we can get the right kind of return on that business model."

Tech Data's fastest-growing technology sectors in the United States during the first quarter were networking, storage, peripherals and notebooks.

"There's an insatiable demand for storage right now, whether you're a little company, a big company or a medium company," Dutkowsky said. "With networking, if you add new employees, you have to add network capacity. It's just a fact of life in the IT space. All of the peripherals, like printers and keyboards, come with expansion. That makes sense that those are the product sets growing the fastest."

Microsoft's release of the Windows Vista operating system has had little impact on Tech Data's sales so far, Dutkowsky said.

"Where we see the benefit is where Vista requires bigger processors, more memory, it's optimized for bigger screens. ... That should create more opportunity for Tech Data to sell richer products," he said. "In the long haul, Vista will become the industry-standard operating system. As that transition happens, Tech Data is prepared to deal with that."

For its second quarter, Tech Data forecasts sales of $5.2 billion to $5.35 billion.

Tech Data shares were trading at $36.21, down almost 4 percent, in afternoon trading.