D&H Breaks From Pack, Delivers Huge PC Growth In Post-XP World

D&H Distributing notched another quarter of monster revenue, defying the industry with double-digit growth in PC sales a year after the Windows XP refresh.

The Harrisburg, Pa.-based distributor delivered 8 percent sales growth in its most recent quarter ended July 31, driven by continued small-business interest in PCs, the Windows Server 2003 refresh and the need for greater connectivity in K-12 settings.

As a private company, D&H does not disclose specific sales figures and declined to discuss profit.

"To be honest, we were anticipating a challenging beginning of the summer," said Dan Schwab, co-president of D&H. He told CRN that made the distributor's broad-based growth even more exciting.

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Most distributors saw a dip in year-over-year PC revenue in the most recent quarter after experiencing a sales bump at this time last year from the end of support for Windows XP. But not D&H.

Schwab said D&H anticipated the high-water mark set last year and proactively worked with vendor partners to come up with offers that bundled notebooks and desktops with wireless upgrades and mobility offerings.

D&H also benefited from higher average selling prices for PCs this year, Schwab said. Many of the end users still using XP last year had smaller IT budgets, meaning they primarily purchased entry-level PCs when they were forced into an upgrade, he said.

Distributors with more midmarket and enterprise customers have indicated that Server 2003 upgrade activity has been tepid thus far, despite the July 14 expiration of support. It's a very different story, though, for the small businesses on which D&H is focused.

Somewhere between 50 percent and 75 percent of D&H's customers using Server 2003 have upgraded, said Schwab, who expects upgrade activity to continue through the end of the year.

D&H is also seeing excitement around Windows 10, with nearly 1,000 solution providers signing up for a recent webinar, Schwab said.

Schwab said he believes the upgrade cycle for Windows 10 will be faster among small businesses, with successful operating system upgrades at home prompting CEOs to take the plunge for the business as well. Windows 10 adoption should contribute to D&H's top line for the remainder of 2015, but Schwab expects the activity to really pick up heading into 2016.

The fragmentation of the K-12 market presents a tremendous opportunity for local solution providers, Schwab said, with smaller school districts often willing to use the company that hung the overhead projector in the auditorium for all their IT needs. The online Common Core testing standards adopted in 2014 are driving demand for everything from Chromebooks and notebooks to wireless Internet and Ethernet ports.

Although Chromebooks continue to dominate the K-12 market from a units sold standpoint, Schwab said Microsoft has gained some market share with its Shape the Future program, in which it helps governments to invest in education technology.

A couple of technology areas didn't see much growth in D&H's most recent quarter, Schwab said. Those include large panels and TVs for digital signage, where a fall in average selling prices caused revenue to drop despite a solid number of units sold.

Schwab expects D&H to maintain high-single-digit growth for the next nine months due to continued interest from the K-12 and health-care verticals, as well as, eventually, Windows 10.

"We think D&H is very well-situated to capture this growth," Schwab said.

PUBLISHED AUG. 10, 2015