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CDW Sees Growth As Customers Shift Cloud Strategies

“As we talk to our customers now, they really are looking at the new normal, I'll call it a hybrid enabled data center,” CDW CEO Chris Leahy says. “We're getting questions around which way to go: hybrid, cloud or a combination of the two … that implies, I'd say growth for on-prem, growth for cloud and a continuing view into, I'll call the on-prem metered model.”

In her first quarter since taking the corner office, CDW CEO Chris Leahy delivered strong results for the solution provider, including growth in every division, and a strong upside in the company’s solution’s business as more of the firm’s clients navigate the line between cloud and on-prem, she told investors during an earnings call this morning.

The Vernon Hills, Ill.-based company saw revenue of $3.95 billion for the first quarter, up 9.7 percent from the year ago quarter. Net income for the quarter ending March 31 was $152.9 million for an earnings per share of $1.04, up 24-percent from the year ago quarter.

“I'm pleased to report that we had an excellent start to the year, with strong top line growth and profitability,” Leahy said in the call. “This quarter's results reflect three key drivers. Our balanced portfolio of customer end markets, the breadth of our product and solutions portfolio, and ongoing execution against our three-part strategy.”

Leahy said she was “particularly proud” of CDW’s growth in the government sector which was up 18 percent despite a partial government shutdown at the beginning of the year.

“The Federal team delivered these excellent results, despite the partial government shutdown in January and tough year-over-year client device compares,” Leahy said. “Regarding the shutdown, the team worked closely with impacted civilian agencies when they reopened, and by the end of the first quarter, our sales to civilian agencies were generally in line with plan.”

She also highlighted growth in hardware, software, and services as a reflection of a stronger economy and its customers’ need to improve their existing technology.

“Solutions performance reflected the ongoing strength in the economy, coupled with customer need to replace aged infrastructure and their desire to take advantage of more efficient and flexible architectures,” Leahy said. “Our sales and technical teams did an excellent job helping customers successfully address these requirements.”

She said CDW’s three pillars of growth – improving productivity, investing in solutions, and offering a value-add to customers -- are helping clients navigate their own digital transformations. She said one of the driver’s of their solution’s business are customers who are trying to strike a balanced between on-prem and cloud, when it comes to storing their data.

“As we talk to our customers now, they really are looking at the new normal, I'll call it a hybrid-enabled data center,” she said. “We're getting questions around which way to go: hybrid, cloud or a combination of the two. So you've got a couple of factors, aged infrastructure and absolute need to upgrade. You've got some deadlines coming up with - that's driving that … that implies, I'd say growth for on-prem, growth for cloud and continuing view into, I'll call the on-prem metered model.”

Leahy pointed to a 500-location health care nonprofit that had moved all of its records to the public cloud, but was suffering performance issues coupled with cost increases once the data was there.

“The solution was to move their entire electronic medical records platforms, networking storage, software and communication back to an on-premise data center,” she said. “There were four key reasons why CDW was uniquely qualified to help the customer through this journey.”

She said because CDW is “technology agnostic,” the company was able to advise the client without bias, its broad portfolio gave the customers a number of solutions to choose from, the CDW health care team has expertise in weighing which solution is best, and CDW was able to implement the project for the customer.

“This project helped our customer reduce costs and improve performance and resulted in over $20 million of net sales,” she said. “We have confidence that our strategy positions us for strong growth, serves us well when confronted with macro channel or partner challenges, and leverages our competitive advantages to deliver strong profitability and cash flow.”

Leahy, who took over as CEO on Jan. 1, joined CDW in 2002 as its first in-house counsel. She has climbed the ranks from senior vice president of international, to chief revenue officer, to CEO, replacing Tom Richards who retired last year.

CDW shares rose nearly 2 percent on Wednesday to $107.60 in afternoon trading.

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