Tech Data 'will bounce back'

Tech Data’s chief executive Steve Raymund is confident that business will pick up in its second quarter, after the distributor saw first-quarter profit plummet by 62 per cent.

As revealed by CRN online, Tech Data’s profits for Q1 ended 31 April 2006 – based on Generally Accepted Accounting Principals – dropped from $33.5m in 2005 to $12.9m in 2006. Turnover also slipped by 2.4 per cent to $4.9bn, compared with $5bn during the same period last year.

The distributor, whose UK subsidiary is Computer 2000 (C2000), highlighted a $6.5m restructuring expense, along with $4.1m of consultation costs, following its recent EMEA restructuring programme.

Raymund told CRN: “Our first quarter wasn’t pretty, but it’s a snapshot. We will improve our performance. In Europe we are grappling with the aftermath of Azlan’s [training division] sale, and our restructure.”

Earlier this year, following disappointing Q4 2005 results, Raymund had predicted “a couple of quarters of hard slog in Europe” before its restructuring efforts paid off (CRN, 13 March).

He added that C2000 had performed well in the quarter. “C2000 is well run,” he said. “It is not a problem area and we were pleased with its [Q1] performance.”

Raymund also said Tech Data is not planning to get involved in any acquisitions, but added that the industry is in for more consolidation.

“There may be some distributor-to-distributor consolidation in the coming quarters,” he said. “We have no plans to make any acquisitions.”

Clive Longbottom, service director at analyst Quocirca, said: “These results reflect a ‘pile it high and ship it cheap’ market, with not a great deal of revenue. This is affecting Tech Data, which doesn’t add much value, especially since the sale of Azlan."

james_sherwood@vnu.co.uk