Tech Data Forecasts 20% Quarterly Decline

Channel News

Even while forecasting a drop in sales of 20 percent for Q1, technology distributor Tech Data’s president tells Channel Insider that many pundits are hoping that Q1 represents the bottom of the recession. Still the outlook beyond Q1 remains murky.

Tech Data is forecasting a first quarter revenue drop of 20 percent, even as the technology distributor hangs onto strong margins. The forecast came as part of Tech Data’s earnings announcement this week.

But what follows the forecast in the quarters to come remains a murky mystery as Tech Data and its solution provider partners say that it’s tough to see when demand will return in the market.

“Our [solution provider] customers typically would have visibility two quarters out,” says Ken Lamneck, Tech Data’s president, in an interview with Channel Insider. “Their visibility has been drawn out. VARs are seeing the same thing. Where they had run-rate business – business that typically happened – everything has become a deal.”

“…Everybody is starting at zero now in their capital budgets and then deciding what they have to do.”

Lamneck says that this recession is different from the dot-com bust after 2000, because back then when everyone was concerned about Y2K issues, IT organisations did a tremendous number of upgrades.

“We were buying more equipment and upgrades faster than we needed to,” Lamneck says. “We always said we sold two years worth of equipment in one year.”

But the drop off in demand that is being experienced now is due to the difficult economy, according to Lamneck. Still, there are some industry observers that believe that the current quarter will be the bottom and demand will soon return, Lamneck says.

In either case, projects that are continuing to get a lot of attention are virtualization, server consolidation and projects that will deliver a return on investment very quickly and save money.

Tech Data reported Q4 revenue of $5.71 billion (£4.0 billion), a 12 percent decline from the the $6.48 billion (£4.54 billion) reported during same period a year ago. Q4 net income came in at $58.6 million (£41 million) or $1.17 (£0.84) per share, up from $50.2 million (£35.2 million) or 92 cents 0.65p per share from the same period last year.

For the full year ended 31 Jan., 2009, Tech Data reported revenues of $24.08 billion (£16.88 billion) compared with $23.42 billion (£16.4 billion) during the previous year. Net income for the full year came in at $123.6 million (£86.76 million) or $240 (£168) per share compared to $108.3 million (£76 million) or $1.96 (£1.37) per share for the same period last year.