The Best And Worst Channel Company Stocks In The Third Quarter Of 2016

Channel Stocks: Gainers And Losers

In the third quarter ended Sept. 30, 18 of the 25 channel companies on our watch list saw the price of their publicly traded shares increase while seven saw the value of their stock decline – two by double digits.

How does that compare to the stock market overall? For the first six months of the year, the Dow Jones Index was up just less than 2.90 percent. But the Nasdaq was down 3.29 percent for the first half of the year.

Here's a look at which companies' stock did well in the third quarter of 2016 and which companies' stock did not.

PCM

CEO: Frank Khulusi

June 30, 2016: $11.14

Sept. 30, 2016: $21.54

Change: +93.36%

PCM, No. 28 on the 2016 CRN Solution Provider 500, recorded the biggest stock price gain among the channel companies on our watch list.

In July PCM executives said the company would hire 100 salespeople during the next year to drive sales of advanced solutions and gain market share in the U.S. and Canada.

For its third quarter ended Sept. 30, PCM reported sales of $584.9 million, up 44 percent from $404.9 million in the same quarter one year earlier. The company reported net income of $5.3 million for the quarter compared with a loss of $785,000 in the same quarter one year ago.

Datalink

CEO: Paul Lidsky

June 30, 2016: $7.50

Sept. 30, 2016: $10.61

Change: +41.47%

Datalink, No. 45 on the 2016 CRN Solution Provider 500, has been growing its consulting and managed services practices in the past two years as it tries to transform itself into a strategic service provider. The goal is less reliance on its legacy lines of business, such as its slow-growing storage system business.

On Nov. 7, outside the period covered by this stock price analysis, Datalink struck a deal to be acquired by solution provider Insight Enterprises (No. 15 on the 2016 CRN Solution Provider 500) for $258 million, or $11.25 per share.

Unisys

CEO: Peter Altabef

June 30, 2016: $7.28

Sept. 30, 2016: $9.74

Change: +33.79%

Unisys continues to make progress toward improving its profitability and cash flow, despite a third-quarter decline in the company's sales and a significant bottom-line loss.

Unisys, No. 19 on the 2016 CRN Solution Provider 500, reported revenue of $683.3 million for the third quarter ended Sept. 30, down nearly 8 percent from $739.2 million in the third quarter of 2015. The company reported a loss of $28.2 million, nearly three times the $9.6 million loss one year earlier.

Insight Enterprises

CEO: Kenneth Lamneck

June 30, 2016: $26.00

Sept. 30, 2016: $32.55

Change: +25.19%

Insight Enterprises has been growing its cloud computing business, which in the third quarter represented 14 percent of the company's revenue. The company continues to grow sales of PCs and servers, software and services – the latter due in part to Insight's October 2015 acquisition of interactive design company BlueMetal.

Sales for the third quarter ended Sept. 30 were $1.39 billion, up 3.8 percent from $1.34 billion in the same quarter one year ago. Net earnings jumped 3.9 percent to $21.6 million from $20.8 million one year ago.

On Nov. 7, outside the period covered by this stock price analysis, Insight Enterprises (No. 15 on the 2016 CRN Solution Provider 500) struck a deal to acquire Datalink for $258 million, or $11.25 per share.

Synnex

CEO: Kevin Murai

June 30, 2016: $94.82

Sept. 30, 2016: $114.11

Change: +20.34%

In July Synnex struck a deal to acquire business process outsourcing company Minacs Group for $420 million. The acquisition is expected to expand the capabilities of Synnex's Concentrix global services division.

For its fiscal 2016 third quarter ended Aug. 31, Synnex reported revenue of $3.67 billion, up 10.1 percent from $3.33 billion in last year's third quarter. Net income in the quarter increased 21.9 percent to $58.7 million from $48.2 million one year ago. The company also announced a quarterly cash dividend of 25 cents per share payable Oct. 28.

Tech Data

CEO: Robert Dutkowsky

June 30, 2016: $71.85

Sept. 30, 2016: $84.71

Change: +17.90%

On Sept. 19 distributor Tech Data unveiled a deal to acquire Avnet's Technology Solutions business for $2.6 billion in a deal that reshapes the value-added distribution landscape. Acquiring Avnet's $9.65 billion Technology Solutions business will boost Tech Data's data center business, growing that operation's share of Tech Data's total revenue from 29 percent to 45 percent.

ePlus Technology

CEO: Mark Marron

June 30, 2016: $81.79

Sept. 30, 2016: $94.41

Change: +15.43%

On Aug. 1 Phil Norton stepped down after serving 23 years as CEO of solution provider ePlus, No. 34 on the 2016 CRN Solution Provider 500. Norton was replaced by longtime chief operating officer Mark Marron.

Marron told financial analysts that the solution provider is investing in areas such as security and hyper-converged infrastructure to position the company for future growth.

SS&C Technologies

CEO: William Stone

June 30, 2016: $28.08

Sept. 30, 2016: $32.15

Change: +14.49%

On Sept. 14, SS&C Technologies, a provider of IT solutions and services for the financial and investment management industry, unveiled an agreement to acquire Wells Fargo Global Fund Services in a move to strengthen its middle- and back-office management capabilities for hedge funds and private equity funds.

For its third quarter ended Sept. 30, SS&C, No. 36 on the 2016 CRN Solution Provider 500, reported revenue of $383.3 million, up 36 percent from $280.9 million in the same quarter one year before. The company reported net income of $38.7 million compared with a loss of $34.6 million one year earlier.

CDW

CEO: Thomas Richards

June 30, 2016: $40.08

Sept. 30, 2016: $45.73

Change: +14.10%

For its third quarter ended Sept. 30, CDW, No. 5 on the 2016 CRN Solution Provider 500, reported sales of $3.71 billion, up nearly 6 percent from $3.50 billion in the same quarter one year ago. Net income was $125.9 million, down more than 16 percent from $150.9 million one year before.

CACI International

CEO: Kenneth Asbury

June 30, 2016: $90.41

Sept. 30, 2016: $100.90

Change: +11.60%

On July 25 CACI said it had been awarded a prime position on a $460 million, five-year, multiple-award contract to provide mission support services for U.S. Cyber Command, representing new work in the company's cybersecurity market area.

For its third quarter CACI, No. 17 on the 2016 CRN Solution Provider 500, reported revenue of $1.07 billion, up more than 30 percent from $822.4 million in the same quarter one year earlier. Net income was $36.7 million, up 6 percent from $34.6 million one year before.

CGI Group

CEO: George Schindler

June 30, 2016: $42.71

Sept. 30, 2016: $47.63

Change: +11.52%

On September 8 CGI, No. 18 on the 2016 CRN Solution Provider 500, said that president and chief operating officer George Schindler would become president and CEO effective Oct. 1, taking over for CEO Michael Roach, who retired effective Sept. 30, the end of the company's fiscal year.

For the company's fiscal 2016 fourth quarter ended Sept. 30, CGI group reported revenue of (Canadian) $2.58 billion (U.S. $1.92 billion), virtually flat from last year's fourth quarter, but up nearly 3 percent on a constant currency basis. Net earnings for the quarter were (Canadian) $274.4 million (U.S. $204.0 million), up nearly 18 percent from one year before.

Connection

CEO: Timothy McGrath

June 30, 2016: $23.80

Sept. 30, 2016: $26.42

Change: +11.00%

In September Merrimack, N.H.-based PC Connection, No. 21 on the 2016 CRN Solution Provider 500, changed its name to Connection to better reflect its IT offerings, from data center and networking, to software and security.

For its third quarter ended Sept. 30, Connection reported sales of $708.5 million, up 4 percent from $680.8 million in last year's third quarter. Net income was $13.6 million, up 4.5 percent from $13.0 million one year before.

Accenture

CEO: Pierre Nanterme

June 30, 2016: $113.29

Sept. 30, 2016: $122.17

Change: +7.84%

Systems integrator Accenture, No. 2 on the 2016 CRN Solution Provider 500, has been pursuing an aggressive acquisition strategy over the past two years. And that didn't slow in the third quarter.

In August Accenture acquired security services company Redcore as part of its efforts to build up its new security practice. In early September it struck a deal to buy New Energy Group, a Salesforce.com solutions and service provider. A few weeks later it moved to buy strategic consulting firm Kurt Salmon, and less than a week later signed a deal to buy Workday partner DayNine.

The company's increased focus on its digital transformation, security and cloud practices is paying off. The company reported revenue in its fiscal 2016 fourth quarter (ended Aug. 31) of $8.49 billion, up 8 percent from $7.89 billion in last year's fourth quarter. Net earnings in the quarter were $1.12 billion, a nearly 44 percent gain from one year before.

Black Box Network Services

CEO: E.C. Sykes

June 30, 2016: $13.08

Sept. 30, 2016: $13.90

Change: +6.27%

Black Box has been on the rebound after a terrible 2015 that included a sales force restructuring and the departure of CEO Michael McAndrew. E.C. Sykes was hired in February to right the ship.

For its fiscal 2017 second quarter ended Oct. 1, Black Box reported revenue of $218.7 million, down 8 percent from $236.8 million in the company's fiscal 2016 second quarter. The company reported a $6.1 million loss for the quarter, including $14.9 million in nonrecurring expenses.

Computer Sciences Corp.

CEO: Mike Lawrie

June 30, 2016: $49.65

Sept. 30, 2016: $52.21

Change: +5.16%

CSC continues to make preparations for its planned merger with Hewlett Packard Enterprise's Enterprise Services operations, a deal unveiled in May that will create a $26 billion IT infrastructure, services and solutions giant with more than 5,000 clients in 70 countries. The companies expect to complete the merger in March 2017.

For its fiscal 2017 second quarter ended Sept. 30, CSC, No. 8 on the 2016 CRN Solution Provider 500, reported revenue of $1.87 billion, up more than 7 percent from $1.75 billion in last year's second quarter. But net income for the quarter was only $15 million compared with $171 million one year ago.

Arrow Electronics

CEO: Michael Long

June 30, 2016: $61.90

Sept. 30, 2016: $63.97

Change: +3.34%

Arrow Electronics has been making progress in transforming itself from its previous products distribution model to focusing on providing digital solutions and services.

For its third quarter ended Oct. 1, Arrow reported sales of $5.94 billion, up more than 4 percent from $5.70 billion in the same quarter last year. Net income was up nearly 8 percent to $117.7 million from $109.2 million one year before.

Ingram Micro

CEO: Alain Monie

June 30, 2016: $34.78

Sept. 30, 2016: $35.66

Change: +2.53%

In February distributor Ingram Micro unveiled a deal to be acquired by Chinese logistics firm Tianjin Tianhai for $6 billion. The acquisition price works out to $38.90 per share. U.S. antitrust officials approved the acquisition Nov. 1 and the companies expect to close the deal by Dec. 15.

For its third quarter ended Oct. 1, Ingram Micro reported sales of $10.23 billion, down 2.7 percent from $10.52 billion in last year's third quarter. Net income was $78.5 million, up 21 percent from $64.9 million one year earlier.

Avnet

CEO: Bill Amelio

June 30, 2016: $40.51

Sept. 30, 2016: $41.06

Change: +1.36%

On July 11 CEO Rick Hamada stepped down after more than five years in the top job. Former Lenovo CEO Bill Amelio was named to replace Hamada on an interim basis while the company searched for a permanent replacement. In early September Amelio was appointed Avnet's permanent CEO.

On Sept. 19 Avnet announced an agreement with distributor Tech Data under which Avnet will sell its Technology Solutions business to Tech Data for $2.6 billion. The companies expect to complete the acquisition, which reshapes the value-added distributor landscape, in the first half of 2017.

ManTech International

CEO: George Pedersen

June 30, 2016: $37.82

Sept. 30, 2016: $37.69

Change: -0.34%

Federal government solution provider ManTech is the first company on our watch list whose stock price declined in the third quarter.

This year ManTech, No. 29 on the 2016 CRN Solution Provider 500, has been expanding its capabilities in cybersecurity, communications and other areas. In June the company acquired the cyber business of Oceans Edge, allowing ManTech to better provide services to the U.S. Cyber Command.

For its third quarter ended Sept. 30, ManTech reported revenue of $415.4 million, up 5.7 percent from $393.0 million in last year's third quarter. Net income was $14.7 million, up 12.6 percent from $13.0 million one year earlier.

Perficient

CEO: Jeffrey Davis

June 30, 2016: $20.31

Sept. 30, 2016: $20.15

Change: -0.79%

Perficient, No. 61 on the 2016 CRN Solution Provider 500, has been expanding its digital transformation services offerings in the last year, launching a digital consulting business unit and making several digital agency acquisitions.

In its third quarter ended Sept. 30, Perficient reported revenue of $119.2 million, down 1 percent from $120.9 million in last year's third quarter. Net income dropped almost 25 percent to $5.5 million from $7.4 million one year ago.

ScanSource

CEO: Mike Baur

June 30, 2016: $37.11

Sept. 30, 2016: $36.5

Change: -1.64%

On Aug. 8 ScanSource surprised the channel when it unveiled an agreement to buy master agent Intelisys Communications for $83.6 million, plus earn-outs, in a deal that will bring more recurring revenue-generating telecom and cloud services opportunities to the distributor's traditional communications resellers.

For the company's fiscal 2017 first quarter ended Sept. 30, ScanSource reported sales of $932.6 million, up 7 percent from $870.8 million in last year's first fiscal quarter. But net income for the quarter was down 7 percent year over year to $14.8 million from $16.0 million.

Systemax

CEO: Larry Reinhold

June 30, 2016: $8.53

Sept. 30, 2016: $7.92

Change: -7.15%

Systemax has been undergoing significant changes in the past year, including closing its retail business and eliminating as many as 500 jobs in an effort to cut costs. In August Systemax, No. 26 on the 2016 CRN Solution Provider 500, sold its German operations to Cancom SE.

For its third quarter ended Sept. 30, Systemax reported sales of $414.8 million, down 2 percent from $423.3 million in last year's third quarter. The company reported a loss of $5.8 million, an improvement from the $10.3 million loss one year earlier.

Syntel

CEO: Rakesh Khanna

June 30, 2016: $45.26

Sept. 30, 2016: $41.91

Change: -7.40%

On Nov. 4, after the period covered in this stock price analysis, president and CEO Nitin Rakesh stepped down after 30 months of leading the company. Chief operating officer Rakesh Khanna was named to lead the company on an interim basis.

The management change came two weeks after Syntel, No. 38 on the 2016 CRN Solution Provider 500, reported results for its third quarter ended Sept. 30. The company reported revenue of $241.3 million, down 5 percent from $253.6 million in last year's third quarter. The company reported a loss of $217.2 million compared with net income of $77.7 million one year earlier.

Cognizant Technology Solutions

CEO: Francisco D'Souza

June 30, 2016: $57.24

Sept. 30, 2016: $47.71

Change: -16.65%

Cognizant, No. 7 on the 2016 CRN Solution Provider 500, disclosed Sept. 30 that the company is conducting an internal investigation into whether the company violated U.S. Foreign Corrupt Practices Act. The probe is looking into whether certain payments relating to facilities in India were made improperly and in possible violation of the FCPA or other laws.

That same day president Gordon Coburn resigned after working at Cognizant for two decades and serving as president for four years. Cognizant did not say whether there was any connection between the internal investigation and Coburn's departure.

News of the investigation and Coburn's resignation sent Cognizant's stock plummeting almost 17 percent to below $46 per share on Sept. 30. The stock has since recovered some of that loss.

Ciber

CEO: Michael Boustridge

June 30, 2016: $1.50

Sept. 30, 2016: $1.15

Change: -23.33%

Ciber, No. 43 on the 2016 CRN Solution Provider 500, has recorded double-digit sales declines in 2016 as it struggles to turn its business around. The company's stock price has suffered steep declines – the biggest on our watch list in the third quarter.

The company has been divesting itself of nonstrategic operations and focusing on its core IT staffing, implementation, application modernization, consulting and managed services businesses. In June the company unveiled a deal to sell its Netherlands business to Milwaukee-based ManpowerGroup for $25 million and in August it struck a deal, also with ManpowerGroup, to sell its operations in Norway for $7 million.

On Oct. 31, after the period covered by this stock price analysis, Ciber said it had engaged a strategic adviser to explore strategic alternatives for the company's future, including a possible sale of the company, a merger with another company, selling additional assets, or new financing or refinancing of the company's debts.