Continuing To Broaden The Mix

Editor/News Steven Burke interviewed Tech Data's Chairman and CEO, Steve Raymund, about the IT spending limate, hot product segments, Hewlett-Packard and other issues, after the distributor posted results for its second fiscal quarter. excerpts follow:

CRN: Talk about the IT spending climate in the Americas.

>> Raymund says Tech Data's ship rates aren't showing major fluctuations, signaling a more stable and solid IT spending climate.

Raymund: What we are seeing is consistent with what we forecast. And that is fairly steady growth from midsingle digit, and I think our growth probably tracks the market reasonably closely. Obviously, we are a long ways off in terms of the robust double-digit [growth] we enjoyed in late 90s. On the other hand, clearly since the second quarter of last year, the industry and our business stopped contracting and began to grow again, albeit at modest rates.

CRN: What kind of trends are we seeing in terms of IT spending?

Raymund: We are not seeing wild fluctuations in our daily ship rates, So business feels like it is stable and reasonably solid. It probably has never been less spiky in terms of the tone and feel of the overall business. That said, obviously underneath the top line, there is a lot of dynamism with some product lines and technologies receding and others coming on [like] gangbusters, most notably things like telephony, voice-over-IP, data supplies, imaging and a few others, exemplifying areas where we see greater than average market growth.

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CRN: Are there any vendors that stand out as you look at that mix?

Raymund: Supplies, for example, are very much reflective of the original revenue generated by the printer manufacturers, so clearly a vendor like [Hewlett-Packard] or Lexmark and increasingly Xerox are the strongest players in that category. In imaging, the category is a little broader including scanners from vendors like Fujitsu and cameras from suppliers like Sony and HP. Telephony is a number of different vendors, including Cisco [Systems] and Nortel [Networks] and Avaya and 3Com.

CRN: What is the relative mix of U.S. business with regard to systems, software and peripherals?

Raymund: Notebooks obviously are among the strongest elements of our systems business. That said, the business is fairly stable across the board. I don't see the mix shifting, although certainly the composition of our VAR marketplace continues to evolve with general-purpose VARs constituting a smaller share in favor of more specialized VARs who are focused more intensely on a particular technology solution.

CRN: Talk about HP business.

Raymund: HP is trying to pursue a more hybrid-oriented channel model, which means that distribution as a segment captures less. So they are making available to distribution less share than they did in past years. The good news is we have been able to obviously replace a very substantial share of that revenue with products from other vendors.

CRN: What products from other vendors are coming to the fore?

Raymund: Certainly a substantial portion of the growth derives from our non-PC portfolio in some of the aforementioned areas like networking led by Cisco, including some sub-segments like security and storage, new vendors like EMC, VoIP from people like Nortel and Cisco and Avaya and so on. So that is an area of nice growth. I mentioned supplies. Within the systems business, we have seen continued momentum from vendors like Fujitsu Siemens, Acer and IBM.

CRN: HP sales represented 27 percent of Tech Data's sales in the quarter, down from 31 percent in the year-ago quarter. Where do you expect the HP business to level off?

Raymund: It really depends on two things: HP's broader performance in the marketplace and--to an extent--their strategy with respect to how closely they want to partner with distribution or decide to insource some of the services we provide to them. That is something that will probably evolve over time. I can't really sit here and predict which way it is going to go. They are a valued vendor. They represent more than a quarter of the business. To the extent they are interested in utilizing our services to help them efficiently reach a very broad marketplace, we are there and ready and willing to help them. If they determine that other channels and partners are better for them in some instances, then so be it.