Tech Data Rides Apple Enterprise Boom To PC Growth

A near-doubling of Tech Data’s Apple business over the past two years has helped the distributor fend off currency headwinds and grow its desktop and notebook businesses.

The Clearwater, Fla.-based distributor saw net income climb 8 percent for the quarter ended Jan. 31, from $74.9 million last year to $80.9 million this year, or $2.29 per share on a non-GAAP basis. This was an all-time, fourth-quarter earnings-per-share high, beating Seeking Alpha expectations of $2.09 per share.

Sales climbed 2 percent, from $7.34 billion in last year’s fourth quarter to $7.48 billion in this year’s quarter, beating Seeking Alpha’s estimate of $7.11 billion.

[RELATED: Tech Data Stock Dives As Weak Enterprise Demand Drags Sales Down]

’Clearly, the Apple product line is finding its way to the enterprise through routes to market like Tech Data,’ Bob Dutkowsky, Tech Data’s CEO, said during an earnings call Thursday. ’The Apple product line has gotten much broader than it was a few years ago.’

Earnings were released before the market opened Thursday. Wall Street was pleased with the results, sending Tech Data’s stock price up 1.4 percent to $73.95 per share.

Tech Data’s relationship with Apple has dramatically deepened as the Cupertino, Calif.-based vendor has moved beyond the iPhone into notebooks, desktops, iPads and television, Dutkowsky said. Apple is Tech Data’s largest vendor partner for the second consecutive quarter and accounts for 24 percent of its overall business today, up from just 13 percent two years ago.

Tech Data’s low-cost logistics network and expanded product offering has enabled the distributor to win in the marketplace and bring more Apple products to business ecosystems, Dutkowsky said. Specifically, non-Windows PCs such as the Chromebook and Apple devices allowed Tech Data to deliver strong results in its North American desktop sales and European notebook business despite overall PC softness.

HP Inc. was Tech Data’s only other major vendor partner, with the printing and PC giant accounting for 10 percent of the distributor’s overall sales in the most recent quarter. Pre-split Hewlett-Packard accounted for 20 percent of Tech Data’s overall sales in the quarter ended Oct. 30, while Cisco – which made up 10 percent of Tech Data’s sales in the quarter ended Oct. 30 – has fallen below 10 percent.

Dutkowsky said it’s way too early to pass judgment on how Tianjin Tianhai’s proposed acquisition of Ingram Micro would affect the distribution landscape and whether Tech Data would be able to gain market share as a result of its largest competitor being owned by a Chinese conglomerate.

’Competitors come, they go, they change profiles, they diversify, all of those change,’ Dutkowsky said. ’We respect them [Ingram Micro] as a competitor. We’ve performed very well in our markets against them.’

It has become increasingly difficult to compare distributors, Dutkowsky said, as the industry has moved away from a uniform pick, pack and ship business model to one where each company has a unique line card, skill sets, cost structure and internal infrastructure.

’Each of the IT distributors are specializing and separating themselves in different areas and different specializations,’ Dutkowsky said.

Dutkowsky considers the differentiation to be a positive trend since it will enable the distributors to differentiate themselves and become more valuable in the eyes of their vendor partners and solution provider customers.

’Disruption is creating unique challenges for our vendor partners and reseller customers, and therefore unique opportunities for Tech Data,’ Dutkowsky said. ’Tech Data thrives during periods of disruption.’

Revenue for the Americas grew 5 percent, to $2.7 billion, due to a strong performance in the distributor’s consumer electronics, desktop, data center, networking and security segments.

European sales, meanwhile, held flat at $4.8 billion due to strong software, broadline, notebook, consumer electronics and security sales. In local currency, Germany, the United Kingdom, Iberia (Spain and Portugal), Italy and Switzerland all delivered double-digit growth, according to the company.

For the coming quarter, Tech Data expects sales of $5.85 billion to $6.05 billion, with both Europe and the Americas delivering low- to mid-single-digit growth on a constant currency basis. Thomson Reuters had been projecting revenue of $6.07 billion.

The distributor is also projecting earnings per share of 90 cents to 98 cents, in line with the Thomson Reuters estimate of 94 cents per share.