Despite a pickup in U.S. computer equipment sales, the Clearwater company failed to meet analysts' expectations.
By JEFF HARRINGTON
Published August 28, 2003
CLEARWATER - Sales of computer equipment in the United States have picked up more than expected but that didn't help Tech Data Corp. meet its earnings target in its second fiscal quarter.
The Clearwater company, the world's second-largest computer distributor and the Tampa Bay area's largest public company, reported net income of $17.2-million, or 30 cents a share, in the quarter ended July 31. That's down 51 percent from income of $35.3-million, or 60 cents a share, a year ago and shy of analysts' average estimate of 36 cents a share.
Sales totaled $4.2-billion, up 4.6 percent compared to $4.0-billion in the second-quarter of the prior year and up nearly 7 percent from the previous quarter. Analysts had expected sales of about $4.0-billion.
After struggling through a tech downturn for three years, the company gave investors reason for hope. Not only did Tech Data see U.S. sales unexpectedly pick up in the second half of the second quarter, but its management team rose the estimate bar for both sales and profits in the third quarter.
Chairman and chief executive Steve Raymund said small- and medium-sized businesses and state and local governments both appear to be placing more orders and seeking more price quotes.
"If I talk to our sales reps about what their customers are saying ... they'll all give me a thumbs-up that things are looking better," Raymund said in an interview late Wednesday.
In a conference call to investors, Raymund acknowledged that the second quarter was "kind of a tough quarter for us from a bottom-line standpoint."
The earnings shortfall was caused in part by the $8-million pretax cost of cutting 200 more jobs in June and the closure of Tech Data's program to train customers about emerging technology products. The company is now outsourcing the training.
In a regional breakdown, sales were down 10.8 percent in the Americas and up 24.1 percent in Europe from a year ago. On a local currency basis, European sales rose 2.8 percent.
Europe accounts for 52 percent of sales, compared to 42 percent in the Americas region. But looking ahead, Raymund indicated the sales picture is murkier in Europe than the United States, in part because all European business is slow during August.
"Not every country has been performing at its highest potential," the Tech Data chief said. "Germany presents the biggest challenge: slowing economic expectations and weak execution." He added that he is encouraged by recent progress of the company's management team in Germany.
For its third quarter, Tech Data predicted earnings of 40 cents to 45 cents a share on revenue between $4.05-billion and $4.2-billion. Analysts on average had been expecting earnings of about 41 cents a share on $4.0-billion in sales.
The results were released after the close of market Wednesday. Shares in Tech Data closed at $33.30, up 78 cents.
