The Best (And Worst) Channel Stocks Of 2013
Wall Street had a very good 2013. And many publicly held solution providers and distributors had a very good year in terms of their stock prices.
All 21 companies on our index recorded double-digit increases in the value of their shares in 2013. That may not be so surprising given that the Dow Jones Index increased 26.5 percent last year and the NASDAQ grew 34.3 percent. The stock prices of most of the companies on this watch list, however, grew faster than that -- some much faster.
But was this a case of a rising stock market tide raising all share-price boats? We provide information about the companies' most recent financial disclosures, and some companies' stock prices went up even though they had flat sales or even revenue and/or income decreases in 2013. Some increased share values didn't necessarily reflect company growth. In those cases, shareholders apparently bid up stock prices in anticipation of future growth.
Here's a look at which channel companies' stock did well in 2013 and which ones really took off.
CEO: Robert Dutkowsky
Dec. 31, 2012: $45.53
Dec. 31, 2013: $51.60
Change: +13.3%
Distributor Tech Data had the smallest stock price increase (13.3 percent) among the companies on our list. Still, double-digit growth is nothing to sneeze at.
Tech Data, based in Clearwater, Fla., hasn't issued any earnings statements for the current fiscal year ending Jan. 31 while the company works on restating financial results going as far back as fiscal 2011 because of possible accounting improprieties at the company's U.K. subsidiary.
In November, Tech Data acquired half of its TDMobility mobile device business owned until then by a joint venture partner. That, Tech Data said, will allow the distributor to better scale the business as it offers more mobile services through channel partners.
Tech Data also took steps in 2013 to expand its TDCloud business, which packages up cloud services, such as the VMware vCloud hybrid cloud service, and offers them to partners.
CEO: Pierre Nanterme
Dec. 31, 2012: $66.50
Dec. 31, 2013: $82.22
Change: +15.7%
Systems integrator Accenture was next on our list, recording a solid 15.7 percent share price growth last year.
Accenture (No. 3 on the CRN 2013 Solution Provider 500 list) wrapped up its first fiscal 2014 quarter Nov. 30 with net revenue of $7.4 billion, up 1.9 percent from the same period one year earlier, and net income of $811.6 million, up almost 6 percent. The company previously reported net revenue of $28.6 billion for fiscal 2013, ended Aug. 31, up 2.5 percent from fiscal 2012. Net income for the fiscal year was up nearly 26 percent to $3.6 billion.
Accenture could be in for an even better 2014 since the company has been tapped for the high-visibility job of taking over the bungled HealthCare.gov website development project.
CEO: Richard Leeds
Dec. 31, 2012: $9.65
Dec. 31, 2013: $11.25
Change: +16.6%
Systemax's share price increased despite a less-than-stellar financial performance in 2013. For the first three quarters of fiscal 2013, ended Sept. 30, Systemax reported sales of $2.48 billion, down 5 percent from $2.61 billion in the same period of fiscal 2012. The Port Washington, N.Y.-based company (No. 20 on the CRN 2013 Solution Provider 500) also reported a $24 million loss for the three-quarter period compared to a profit of $18.8 million for the same period in 2012.
In June, Carl Fiorentino, a former executive of Systemax's North American Technology Products Group, was indicted on federal charges of mail fraud, wire fraud, money laundering and conspiracy in connection with what Systemax called "a scheme to defraud the company." He is charged with taking more than $7 million in bribes and kickbacks in return for allegedly steering more than $230 million in business to companies in California and Taiwan. The charges followed an internal company investigation in 2011. Fiorentino has pleaded not guilty and is awaiting trial.
CEO: Boland Jones
Dec. 31, 2012: $9.78
Dec. 31, 2013: $11.59
Change: +18.5%
For the nine months ended Sept. 30, Atlanta-based Premiere Global Services reported sales of $393.2 million, up 3.4 percent from the same period in 2012. Net income rose almost 8 percent during the Telethree-quarter period to $19.7 million.
Premiere Global (No. 50 on the CRN 2013 Solution Provider 500 list) specializes in cloud-based collaboration and virtual meeting technology. In September, the company acquired ACT Conferencing, a global supplier of integrated conferencing solutions, for $44 million.
CEO: Thomas Richards
June 27, 2013: $18.37
Dec. 31, 2013: $23.36
Change: +27.2
CDW went public on June 27 last year, closing its stock price at $18.37 the first day of trading.
For the first three quarters of fiscal 2013, ended Sept. 30, CDW reported sales of $8.06 billion, up 7 percent from the same nine-month period in 2012. But the company's net income of $72.8 million for the nine months was down 15.1 percent from the same period in 2012.
On Nov. 1, Vernon Hills, Ill.-based CDW declared a quarterly cash dividend of $0.0425 per common share, its first as a public company.
CEO: Kenneth Lamneck
Dec. 31, 2012: $17.37
Dec. 31, 2013: $22.71
Change: +30.7%
For the nine-month period ended Sept. 30, Insight Enterprises reported sales of $3.75 billion, down 5 percent from the same period in 2012. Net earnings for the three-quarter period were down 30 percent year-over-year to $50.6 million.
The Tempe, Ariz.-based company provides services and expertise in data center systems, virtualization, unified communications, mobility and cloud computing. In April, the company launched the "Choose Your Own Device" service through which clients can offer their employees a choice of company-approved devices with appropriate security and standardization.
Insight Enterprises was No. 12 on the CRN 2013 Solution Provider 500 list and made the CRN 2013 Tech Elite list.
CEO: Mike Baur
Dec. 31, 2012: $31.77
Dec. 31, 2013: $42.43
Change: +33.6%
For the first quarter of fiscal 2014 ended Sept. 30, ScanSource reported sales of $731.9 million, down a fraction of 1 percent from the same period one year earlier. Net income was $19.4 million, up 10.2 percent from the first quarter of fiscal 2013.
The Greenville, S.C.-based distributor reported sales of $2.88 billion in fiscal 2013, ended June 30, down 4.6 percent from fiscal 2012, while net income plunged more than 53 percent to $34.7 million.
In May, ScanSource expanded its relationship with Cisco, going beyond the manufacturer's security and networking gear to include Cisco's voice, video and collaboration products. In June, ScanSource established a strategic alliance with Intelisys to help solution providers develop cloud computing service businesses.
CEO: Francisco D'Souza
Dec. 31, 2012: $73.88
Dec. 31, 2013: $100.98
Change: +36.7%
Cognizant is one of the channel companies on our list whose rise in stock price is commensurate with its financial performance. For the first nine months of 2013, ended Sept. 30, Teaneck, N.J.-based Cognizant reported sales of $6.49 billion, up 20 percent from the same period one year earlier. Net income for the period grew 17 percent to $904.2 million.
Cognizant (No. 10 on the CRN 2013 Solution Provider 500) provides a broad range of IT services, ranging from CRM and mobility systems, to application development, to solutions for the health-care and financial services industries. The company's October acquisition of Equinox Consulting, a financial services consulting firm in France, strengthened the company's consulting presence in Europe.
CEO: Phillip Norton
Dec. 31, 2012: $41.34
Dec. 31, 2013: $56.84
Change: +37.5%
For the first six months of ePlus' fiscal 2014, ended Sept. 30, the company reported revenue of $530.4 million, up more than 5 percent from the first half of fiscal 2013. But net earnings were down more than 9 percent year-over-year to $16.4 million.
Herndon, Va.-based ePlus, a major Cisco partner, plays in a broad range of technology areas, including services in data center, IT infrastructure, mobility, security and collaboration, among others.
The company is No. 40 on the CRN 2013 Solution Provider 500 list and was on the CRN Tech Elite list in 2013.
CEO: Alain Monie
Dec. 31, 2012: $16.92
Dec. 31, 2013: $23.46
Change: +38.7%
Ingram Micro's sales for the first three quarters of 2013, ended Sept. 28, reached $30.7 billion, up a healthy 16.2 percent from the first three quarters of 2012. But net income for the three quarters was down 3 percent year-over-year to $204.6 million.
In September, Ingram named Paul Read the company's new president and COO, the latest in a number of executive changes at the Santa Ana, Calif.-based distributor. Alain Monie, who previously held those posts, was promoted to CEO in January.
Also in September, Ingram Micro added to its cloud portfolio by acquiring cloud hosting company SoftCom. But in December, the company dissolved its North America Specialty Solutions Division, redistributing its business units among other company divisions.
CEO: Mike Lawrie
Dec. 31, 2012: $40.05
Dec. 31, 2013: $55.88
Change: +39.5%
For the first two quarters of fiscal 2014, ended Sept. 27, CSC reported revenue of $6.44 billion, down 10 percent from the same period in 2012. But net income nearly doubled year-over-year to $359 million.
CSC has been divesting itself of business units it no longer considers central to its core business of "next-generation technology solutions and services." In May, for example, the company sold its Applied Technology Division (base operations, aviation and range services), the company's sixth divestiture in seven months.
In August, CSC, based in Falls Church, Va., expanded its big data business by acquiring Infochimps, developer of big data Platform-as-a-Service technology. And in October, CSC (No. 5 on the CRN 2013 Solution Provider 500 list) announced a deal to buy enterprise cloud management company ServiceMesh.
CEO: Rick Hamada
Dec. 31, 2012: $30.61
Dec. 31, 2013: $44.11
Change: +44.1%
For the fiscal 2014 first quarter ended Sept. 28, distributor Avnet reported sales of $6.35 billion, up 8.1 percent from the first quarter of fiscal 2013. Net income was $120.6 million, up 20.3 percent year-over-year.
For all of fiscal 2013, ended June 29, Avnet reported sales of $25.46 billion, down 1 percent from fiscal 2012. And net income for the fiscal year was down 20.6 percent to $450.1 million.
Like other distributors, Tempe, Ariz.-based Avnet has been seeking ways to expand its cloud service offerings. In June, the company struck a deal to acquire Seamless Technologies, a systems integrator specializing in cloud and data center automation services. And in August, the distributor's Avnet Technology Solutions group entered into a distribution partnership with PeakColo to carry that company's cloud services platform.
CEO: Michael Roach
Dec. 31, 2012: $23.13
Dec. 31, 2013: $33.46
Change: +44.7%
CGI Group reported sales of $10.08 billion Canadian (U.S.$9.19 billion) for fiscal 2013, ended Sept. 30, up a whopping 111 percent from fiscal 2012. Net earnings for fiscal 2013 were Canadian $455.8 million (U.S.$415.2 million), up almost 250 percent from the previous year.
But while much of 2013 was a good one for CGI (No. 15 on the CRN 2013 Solution Provider 500 list), things came crashing down at year's end when CGI found itself at the center of the Healthcare.gov controversy, probably the year's biggest IT disaster. CGI held the $93.7 million contract to build the health insurance exchange. When it failed to work during its October launch, many people pointed fingers at the Montreal-based computer services company.
CEO: Michael Long
Dec. 31, 2012: $37.41
Dec. 31, 2013: $54.25
Change: +45.0%
Arrow Electronics reported sales of $15.2 billion for the first nine months of 2013, ended Sept. 28, up 1.3 percent from the same period in 2012. But net income for the period was $264.6 million, down more than 20 percent from the first three quarters of 2012.
Like other distributors in 2013, Arrow worked hard to expand its presence in cloud computing. It began offering its ArrowSphere cloud service brokerage and cloud aggregation platform to channel partners in the U.S. and Canada.
The Englewood, Colo.-based company also inked deals to distribute SafeNet's cloud-based secure data and storage technologies and DinCloud's hosted virtual desktop services. Arrow also teamed up with Intel to provide resources to solution providers to meet converged infrastructure opportunities.
CEO: Frank Khulusi
Dec. 31, 2012: $6.21
Dec. 31, 2013: $10.27
Change: +65.4%
For the first nine months of 2013, ended Sept. 30, PCM reported sales of $1.05 billion, up 1.3 percent from the same period in 2012. But net income soared 128 percent to $6.3 million.
El Segundo, Calif.-based PCM (No. 27 on the CRN 2013 Solution Provider 500 list) is currently building a Tier III cloud data center facility in New Albany, Ohio.
CEO: Prashant Ranade
Dec. 31, 2012: $53.63
Dec. 31, 2013: $90.95
Change: +69.6%
Syntel reported sales of $601.5 million for the nine months ended Sept. 30, up 12.2 percent from the same period in 2012. Net income for the nine-month period rose 13.1 percent year-over-year to $153.4 million.
Troy, Mich.-based Syntel (No. 44 on the CRN 2013 Solution Provider 500 list) provides a broad range of integrated information technology and knowledge process outsourcing solutions. In December, the company opened a new development center in suburban Baltimore, the company's fourth such center in the U.S.
CEO: William Stone
Dec. 31, 2012: $23.09
Dec. 31, 2013: $44.26
Change: +91.7%
Now we get to the solution providers whose stock values didn't just grow in 2013 -- they exploded.
Windsor, Conn.-based SS&C reported sales of $530.2 million in the first nine months of 2013, ended Sept. 30, up 39.5 percent from the same three quarters in 2012. Earnings surged more than 206 percent year-over-year for the same period to $91 million.
SS&C (No. 48 on the CRN 2013 Solution Provider 500 list) focuses on providing financial and investment software and services. In October, the solution provider acquired Prime Management Ltd., a service provider in the insurance-linked securities market.
CEO: J. Edward Coleman
Dec. 31, 2012: $17.30
Dec. 31, 2013: $33.57
Change: +94.0%
The surge in Unisys' stock price isn't reflective of the company's financial performance in 2013. For the first nine months of the fiscal year, ended Sept. 30, Unisys reported sales of $2.46 billion, down 9.8 percent from the first three quarters of fiscal 2012. For the bottom line, the company reported a $25.1 million loss for the three-quarter period in 2013 (including $28.9 million in pension expenses and $23.1 million in debt reduction charges), compared to a profit of $47.6 million in the first three quarters of 2012.
One element Unisys is counting on for its future growth is the "Forward! By Unisys" platform the company announced in October and began delivering to clients in December. Forward! By Unisys is a fabric-based architecture the company said brings mission-critical security, scalability and availability to workloads running on Intel-based servers.
Blue Bell, Pa.-based Unisys was No. 19 on the CRN 2013 Solution Provider 500 list.
CEO: Kevin Murai
Dec. 31, 2012: $34.38
Dec. 31, 2013: $67.40
Change: +96.0%
For its fiscal 2013, ended Nov. 30, Synnex reported revenue of $10.85 billion, up 5.4 percent from fiscal 2012. But net income for the year, $152.3 million, was virtually flat with fiscal 2012.
In September, Synnex, through its Concentrix Corp. global business services division, struck a deal to acquire IBM's $1.2 billion CRM business process outsourcing operations for $505 million. CEO Kevin Murai said the move allows Fremont, Calif.-based Synnex to pursue client growth in the midsize business market and become a player in the $55 billion CRM BPO market.
CEO: Jeffrey Davis
Dec. 31, 2012: $11.78
Dec. 31, 2013: $23.42
Change: +98.8%
For the first nine months of fiscal 2013, ended Sept. 30, Perficient reported sales of $275.9 million, up 13.1 percent from the same nine-month period in 2012. Net income growth for the three quarters was even more impressive, up 35.7 percent to $15.9 million.
St. Louis-based Perficient (No. 79 on the CRN 2013 Solution Provider 500 list) was on an acquisition tear in 2013. The company expanded its Salesforce.com expertise with acquisitions of Clear Task in May and CoreMatrix Systems in October.
In April, the company launched a mobile computing practice built around IBM's mobile computing technology.
CEO: Tim McGrath
Dec. 31, 2012: $11.50
Dec. 31, 2013: $24.85
Change: +116.1%
PC Connection recorded the biggest stock price gain in 2013 among the publicly held solution providers and distributors on our list, more than doubling its share value during the year.
PC Connection, No. 25 on the CRN 2013 Solution Provider 500 list, reported sales of $1.64 billion for the nine months ended Sept. 30, a 2.5 percent gain over the same three-quarter period in 2012. Net income for the period was $25.8 million, up 6.8 percent year-over-year.
Because of the Merrimack, N.H.-based company's robust sales growth and cash flow, PC Connection's board in December approved a special dividend for shareholders of 40 cents per share.