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Tech Data exceeds earnings forecast

LOUIS HAU
Published November 26, 2003

CLEARWATER - Continued growth in U.S. and European computer equipment sales helped Tech Data Corp. beat Wall Street earnings and sales expectations in its fiscal third quarter.

Still, net income during the quarter plunged 19 percent from a year earlier due largely to competitive pressures holding down prices in the U.S. and Europe and the cost of upgrading the company's own computer systems in Europe.

Those declines were partly offset by savings from staff cuts the company made in June.

For the quarter ended Oct. 31, the Clearwater computer-equipment distributor reported net income of $26.5-million, or 46 cents a share, on sales of $4.4-billion, exceeding the consensus Wall Street projection of 43 cents a share on sales of $4.1-billion. A year earlier, Tech Data, the Tampa Bay area's largest publicly traded company, reported net income of $32.8-million, or 57 cents a share, on sales of $3.8-billion.

Tech Data chief executive Steve Raymund said the quarter's sales gains were fueled by recovering economies in the U.S. and Europe and gains in market share.

In the U.S., information-technology spending appears to have turned a corner, with demand "showing every sign of continued growth, albeit at a modest rate of growth," Raymund said in an interview.

"We're not talking about the heady days of the late '90s when the IT industry was growing in strong double-digit rates," he said.

Rather, spending on computers and related equipment will likely post growth rates in the single digits, slightly outpacing U.S. economic growth, Raymund said. For example, if the U.S. economy grows 3 percent, IT spending can be expected to grow by about 5 to 6 percent, he said.

For the time being, most IT spending in this country is being led by retail consumers and small- and medium-sized businesses, "with larger enterprises still sidelined," he said.

Meanwhile, Tech Data's European sales are receiving a lift from Hewlett-Packard Co.'s consolidation of the number of distributors and resellers it uses in that market. Tech Data is one of HP's biggest distributors in Europe and is a direct beneficiary of the consolidation, Raymund said.

Tech Data's third-quarter net sales in Europe were $2.3-billion, up 31.7 percent, or 13.1 percent on a local-currency basis, from a year earlier. European sales, which were boosted by the company's acquisition of Azlan Group PLC in March, accounted for 53 percent of worldwide sales. Net sales in the Americas during the same period were $2.1-billion, up 1.1 percent from a year earlier, making up 47 percent of worldwide sales.

For its fiscal fourth quarter ending Jan. 31, Tech Data is projecting net sales of $4.5-billion to $4.6-billion and net income of $29-million to $32-million, or 50 to 55 cents a share.

Tech Data's third-quarter results were released after Tuesday's market close. The company's shares closed Tuesday at $32.53, up 48 cents.

-Louis Hau can be reached at hau@sptimes.com or 813 226-3404.

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