Signs of stability
In terms of market capitalisation, even the largest distributors are tiny compared to the biggest tech vendors. They are, however, right in the middle of the technology channel and, as such, good barometers of the health of the technology business.
Broadline distributor Tech Data, which is known as Computer 2000 in the UK, announced its second quarter earnings today and they were well ahead of analyst estimates. Revenue of £5.184 billion compared favourably to the anticipated $5 billion or so, while EPS (earnings per share) of 70 cents was much higher than the 45 cents expected.
It doesn't look like there was any particularly exceptional reason for this over-achievement - just hard work and tight control of overheads - but any signs of prosperity among distributors could well be an indication of improved trading conditions in general. If things are picking up, Tech Data looks well positioned to capitalise on the many opportunities created by the recession.
"Our second-quarter results exceeded our expectations for the third consecutive quarter and we believe our performance firmly validates our strategy in action," said Tech Data CEO Bob Dutkowsky. "Disciplined sales execution, combined with focused expense and inventory management practices, enabled Tech Data to achieve market share gains while improving operating income and return on capital employed."
"We continue to invest in opportunities that are strengthening our expertise and expanding our IT solution offerings. With over $1.0 billion in available cash, Tech Data is well-positioned both strategically and financially to drive continued improvement throughout our organization."
Tech Data's Q3 outlook cited the on-going decline in IT spending and the potential strengthening of the US dollar as negative factors, contributing to an anticipated year-on-year decline in revenues. However, it identified signs of stability in the Americas (although not in Europe) and predicted that any declines would not be as great as they were in the first half of the year.
