Computer-Distributor Tech Data Profits Lower|
Wednesday December 1 5:28 PM ET
By Michael Connor
MIAMI (Reuters) - Tech Data Corp. (NasdaqNM:TECD - news), the world's No. 2 computer-goods
distributor, on Wednesday reported lower quarterly profits and said Y2K fears among its big corporate
customers were hurting sales and earnings.
Shares of Tech Data, beaten down in recent months along with those of other computer-equipment
middlemen, fell more than 16 percent following the news. The shares later recovered a bit but ended down
$1-3/16 at $23-5/16 on the Nasdaq stock market.
The Clearwater, Fla.-based company also said its president and chief operating officer, Anthony Ibarguen,
was quitting to join a venture capital group in Pennsylvania.
Tech Data's net income for the fiscal third quarter, ended Oct. 31, totaled $33 million, or 60 cents per
diluted share, down from $34.1 million, or 63 cents per share, in the same quarter a year earlier.
The per-share earnings were a penny ahead of the 59 cents projected by analysts surveyed by First
Call/Thomson Financial, which tracks brokerage estimates.
Tech Data's sales in the quarter grew to $4.31 billion from $3.28 billion a year earlier. The company said its
sales growth and profitability were strong across all regions.
U.S. sales grew 44 percent and represented a majority of the company's sales. Sales grew only 14 percent
in Europe, where Tech Data faces competitive pricing. Sales in other international markets grew 60 percent.
Europe represented 39 percent of total sales, while international markets were 7 percent.
Tech Data executives said after the earnings release that worries among corporate buyers about possible
Y2K computer problems were hurting its fourth quarter. But they expressed confidence that business would
pick up next year.
Sales for the fourth quarter, ending in January, will be about $4.7 billion, and earnings will be 64 to 69
cents a share, below Wall Street expectations, Chief Financial Officer Jeffery Howells said.
``We think Year-2000 is costing us a few hundred million (in sales) in the quarter. That's the sole
reason...,' said Chief Executive Steven Raymund.
He said sales at Tech Data, a global distributor of 75,000 computer products, were growing well among
medium and small businesses, which do not face the same Y2K worries as big corporations with elaborate
The Tech Data executives said they expect per-share profits in the next fiscal year to grow 20 percent over
the year ending in January.
``I think there will be a snapback (in sales),' Raymund said. He said in an interview that earnings might
increase even more, but he could not confidently predict profit margins and sales rates. ``As a starting point,
it makes sense to look at $2.80 a share,' he said.
Before Wednesday's news, analysts had expected the company to earn between $2.90 and $3 per share in
the fiscal year ending in January 2001.
Shares of Tech Data, Ingram Micro (NYSE:IM - news) and other big computer-equipment distributors have
been beaten down by narrowing profit margins, shifting business conditions, and investor fears that the
Internet may eliminate many middleman functions.
But Raymund said Tech Data's online business had topped $2 billion and was growing as
computer-equipment manufacturers trim the ranks of distributors they use and outsource many central tasks.
Tech Data said it would not replace its outgoing president Ibarguen, who is joining Internet Capital Group
Inc. (NasdaqNM:ICGE - news). Nestor Cano, Tech Data's executive vice president of U.S. sales and
marketing, was promoted to president of the Americas responsible for U.S., Canadian and Latin American