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European sales drive Tech Data profit increase

The Clearwater computer distributor says the weaker U.S. dollar is enticing to the market.

By Times Wire
Published November 24, 2004

Tech Data Corp., the world's No. 2 distributor of computers and related parts, said European sales pushed third-quarter profit up 43 percent. The shares rose as much as 6.3 percent after the Tampa Bay area's biggest public company said profits this quarter will beat analysts' estimates.

European customers are taking advantage of a lower U.S. dollar to buy products at a discount, the Clearwater company said. Sales to Europe rose 13 percent to $2.6-billion, Tech Data said. Sales in the Americas rose 3.9 percent.

"Business in Europe picked up in September and continued through October," said Rob Semple, a Credit Suisse First Boston analyst, who rates the shares "neutral."

"The strength was related to a strong postvacation rebound but also due to the appreciating euro," Semple said.

Tech Data chief executive Steve Raymund said he was disappointed revenue in the Americas' unit was not higher, citing an opportunity to "dial up our performance to a higher level."

But he had no complaints on the profit side with the Americas' unit and the long-sluggish Europe unit up sharply.

In Europe, "we had good top-line growth, but the bottom line tripled in a year-to-year basis," Raymund said. "We're not done there. We think we still have significant untapped potential in Europe."

Tech Data shares jumped as much as $2.69 in extended trading. They gained 22 cents to $42.91 in Nasdaq Stock Market composite trading. They have gained 8.1 percent this year.

Profits this quarter will be 70 cents to 75 cents a share, Tech Data said, beating analysts' estimates of 69 cents. Sales will be $5.15-billion to $5.3-billion, beating estimates of $5.07-billion.

Analysts expected a third-quarter profit of 55 cents a share, the average of 10 estimates in a Thomson Financial survey, on sales of $4.73-billion.

The dollar lost 5.9 percent of its value against the euro in the three months ended Oct. 31, Bloomberg data show. That boosted Tech Data's results in the European market, as those customers used their stronger currency to buy products more cheaply.

Third-quarter sales of products made by Hewlett-Packard Co. fell to 28 percent of sales from 32 percent in the year earlier period, Tech Data Chief Financial Officer Jeffery Howells said on a conference call with analysts.

Hewlett-Packard is selling more of its products directly to its customers, Tech Data has said.

Times staff writer Jeff Harrington contributed to this report, which uses information from Bloomberg.

[Last modified November 24, 2004, 00:09:21]