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Tech Data Says Hybrid IT Spending Drove Q1 Growth

Customers are buying a mix of cloud products and on premises equipment as "refresh" flourishes

Tech Data said on Thursday that stronger-than-expected PC, server and storage sales drove growth last quarter, even as the company saw double-digit growth in the cloud, which backs its premise that the future lies in preparing for businesses to borrow the best elements from both platforms.

’It's interesting if you look at it, we had server and storage growth in the quarter, and we had cloud growth in the quarter,’ said Bob Dutkowsky, CEO of the Clearwater, Fla.-based distributor of technology products, services and solutions. ’And it validates that what the world is going to look like in the long run is a hybrid model, with a combination of cloud and on-prem driving the IT infrastructure. Our performance in the quarter validates what the world will look like, and we’re really well positioned to take advantage of that.’

Dutkowsky said its product, StreamOne, has helped the company capture that market, and bridge the gap between the two IT models. The company’s cloud offerings were up ’solid double digits’ last quarter.

’We’re deploying our StreamOne capabilities on a more global basis, and that’s creating opportunities for us to grow that cloud revenue,’ Dutkowsky said. ’And we continue to invest in that space. I’ve said this many times, that the development of StreamOne is the single largest organic IT project that we’ve run in the 12 years I’ve been in the company. It’s a big investment, but it's an important component of our long-term strategy. And it's where the market is headed.’

Looking ahead, Tech Data said it sees growth in cloud analytics and security, but on the ground, the company sees opportunities in flash storage, converged and hyper-converged systems inside the traditional data center, which it feels could be driving the server growth that they have seen.

’I think a part of the rebound is this refresh cycle is entering into the data center architecture,’ Dutkowsky said. ’That’s one area where Tech Data portfolio of products is exceptionally strong, so we should be able to take advantage of that, and I think we did in the quarter. There was a lull in PCs and now I think the PC has rebounded nicely. I think it's driven by the refresh cycle mentality that exists inside IT.’

The company recorded a stong quarter financially, with sales of $8.54 billion -- up 22 percent from the $7.02 billion recorded from the same quarter a year ago.

Tech Data’s net income came in at $33.6 million this quarter ending April 30, for earnings per share of $0.88, which is up from the year ago quarter when net income reached $30.6 million with earnings per share of $0.82. Company shares rose 5 percent on Thursday afternoon to $86.54.

The next big bet for oncoming CEO Rich Hume is positioning Tech Data in the PC arena where vendors are preparing to launch the products as a device-as-a-service. Hume said the sticking point for that, is around monthly pricing, and in the terms and conditions of lease agreements.

’The value proposition is quite attractive.’ Hume said. ’If that happens I think that’s going to open up pretty broadly and quickly. I think we have built the capability to serve the market around device as a service. The vendors are telling us that this is going to be a full steam ahead, so we are prepared for that. If I were to characterize it, it would feel like the cloud felt five, six years ago in terms of movement.’

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