Wednesday, May 23, 2018
Business

Tech Data battles to keep pace with the mobile evolution

The global mobile revolution is happening so fast that it's hard for even front-line competitors like Tech Data Corp. to keep up.

The Clearwater-based IT products distributor — Tampa Bay's largest public company by revenue — missed earning targets Monday, triggering a hit to its stock price.

One of the biggest drags on profits: the company's rapid shift from distributing higher-margin products like servers to lower-margin products like tablets, mobile phones and software.

"Look across the landscape … and laptops and portable PCs are being replaced by tablets," Tech Data CEO Bob Dutkowsky said in an interview. "… It's just the reality that technology goes through these transitions. It'll just take us a couple quarters to find our level in this new world."

Overall, the company's report was mixed, with a 5 percent surge in revenue to a better-than-expected $7.5 billion, offsetting some concerns about net income. For the year, revenue was down 4 percent to $25.4 billion.

Paper profits looked better than reality. Tech Data's quarterly net income jumped 53 percent to $82.5 million, or $2.17 per share, due largely to a big tax benefit. Take away a deferred tax valuation allowance in Europe and its earnings were $1.48 per share, up from $1.29 a year ago but far short of the $1.75 per share expected on Wall Street.

It could have been worse, Dutkowsky said, if the company hadn't established strong customer relationships ahead of the mobile shift.

Four years ago, Tech Data sold virtually no tablets; in the fiscal year that just ended Jan. 31, the company notched $2 billion worth of tablet sales along with $2 billion worth of cellphones and smartphones.

To offset the low-profit mobile sales, Tech Data has been diversifying into higher-margin items like distributing a high-end IBM server and IBM storage products, both million-dollar systems.

Shares of Tech Data closed Monday at $47.80, down $4.43, or 8.5 percent.

Jeff Harrington can be reached at [email protected] or (727) 893-8242.

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