Analysts splash praise on Tech Data

The Clearwater technology company says it has survived a price fight and is set to soar. Analysts eagerly agree.

By ROBERT TRIGAUX

© St. Petersburg Times, published June 8, 2000

CLEARWATER -- Tech Data Corp. chief executive Steve Raymund speaks like a grizzled veteran who has witnessed the carnage of war.

And why not? Tech Data, the world's No. 2 distributor of computer products and one of the Tampa Bay area's biggest companies, is just emerging from a two-year price war that wiped out or wounded many industry competitors.

While the fighting is hardly over, Raymund says Tech Data is stronger than ever and poised to reap the spoils, in added market share, of a survivor.

As evidence, the company on Wednesday reported record-breaking sales and net income that topped analysts' estimates for its first fiscal quarter ended April 30. Tech Data's net income grew 33 percent to $37.2-million, or 68 cents per share, compared with $28-million, or 53 cents per share, in the same period last year. Sales grew 27 percent to $4.92-billion, up from $3.88-billion a year ago.

In a late afternoon conference call with Wall Street and regional investment firms, analysts enthusiastically congratulated Tech Data on its performance. Raymund and other company executives told analysts that Tech Data is gathering speed and should have a great year.

"This is a clear recognition that the horrible price war of the last six or seven quarters is at an end and a healthy resumption of growth and profitability is under way," Raymund said in an interview.

Profit margins that were whittled to the nub in 1998 and 1999 are starting to fatten, thanks to the resilient economy and the struggles of competing CHS Electronics (now in Chapter 11 bankruptcy) in Miami; InaCom Corp. (cash flow problems) in Omaha, Neb.; Merisel Inc. (weak finances) in El Segundo, Calif.; and No. 1 distributor Ingram Micro (slower sales, weaker earnings) in Santa Ana, Calif.

"It doesn't hurt when you have two or three competitors go belly up," Raymund said.

Another reason for the rebound: This quarter is the company's first after lingering concerns of a year 2000 bug stifled demand for computer products.

For the first quarter, Tech Data attributed its strong gains to higher personal computer demand and revenue from a $6-billion contract struck last spring to assemble and deliver PCs for General Electric Co.

"The main thrust behind their growth is GE," said David Childe, an analyst at Morgan Keegan Inc., who rates Tech Data an "outperform."

Of Tech Data's three key markets -- the United States, Europe and Latin America -- the company said growth was strongest in the United States.

Tech Data was expected to earn 64 cents a share, the average estimate of 15 analysts polled by First Call/Thomson Financial. The company beat that figure by 4 cents.

If one event soured Raymund's outlook Wednesday, it was a federal judge ordering that Microsoft Corp. be split in two to break the company's monopoly power.

Raymund said he was surprised Microsoft and the federal government had not settled their feud. And he said he did not like the precedent of the government stepping in to the tech field.

"I am nervous about government meddling and messing with a part of the economy it does not understand," he said.

Raymund said he thought the computer industry had benefited from the "leadership, direction and predictability" brought about by Microsoft's dominant role.

"It's staggering," he said of the judge's order. "I do not know of any consumers who think they were abused by Microsoft. Most of the complaints have come from Microsoft's competitors."

Tech Data Corp.

WHAT IT DOES: World's second-largest distributor of computer products.

CHIEF EXECUTIVE: Steve Raymund

EMPLOYEES: 9,600; 4,000 in Tampa Bay area.

HEADQUARTERS: Clearwater

STOCK PRICE: $38, up 50 cents Wednesday.

FIRST-QUARTER SALES (ending April 30): $4.92-billion, up 27 percent from year ago.

FIRST-QUARTER NET INCOME: $37.2-million, or 68 cents per share, up 33 percent from year ago.

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