Tech Data CEO's four key statements following mixed Q4

Rich Hume opens up on taking more aggressive action to rip out low-margin business segments

Revenues grew by four per cent in Q4 for Tech Data to $10.5bn, while operating income increased by nine per cent.

The US distributor missed revenue estimates, sending stocks falling 8.8 per cent overnight.

CRN sister title Channel Partner Insight has picked out CEO Rich Hume's key statements from his earnings call with investors, as he opens up on stripping back Tech Data's portfolio and continued struggles in Europe.

Hume open to divesting parts of Tech Data's portfolio

Tech Data will be more aggressive in cutting out areas of its portfolio that yield low returns, said Hume.

Without going into specifics, the CEO even suggested that Tech Data could resort to divesting segments of its portfolio in order to deliver higher profitability and shareholders higher returns.

"We have always been very focused on our portfolio and managing the health of our portfolio, but as we move forward, we are going to be more deliberate in terms of calling out those things that do not provide a good return for our company or our shareholders," said Hume in an earnings call transcribed by Seeking Alpha.

"Typically when we work on these things there are one of three reactions. The first reaction is: we work with the vendor community and we get a better set of margin opportunities for ourselves. The second would be that we could increase our prices, and perhaps lose a little bit of business but overall have a better financial return. The third is that if we don't find a way forward then we ultimately divest some segments of our business."

One analyst commented that stripping back its portfolio is a U-turn against Tech Data's original ambition of creating an end-to-end proposition via its acquisition of Avnet Technology Solutions.

Hume responded that Tech Data will not scrap entire business segments, but rather exit vendor relationships that deliver low returns.

"We will likely participate in most of the segments, if not all the segments we are in today. There are particular relationships within those segments that deliver a lower overall return than others, so the end-to-end idea of our value proposition is absolutely in fact.

"And I think that when you take a look at the capabilities that we deliver in that end-to-end portfolio, they will continue well into the future. I would just suggest that you think about it in the context of the overall portfolio. The things that provide little or no return are the things we are going after and we are going to use that cash to really fuel our future in terms of where there is more growth within the market."

For the full article, see Channel Partner Insight.