Wednesday, May 23, 2018
Business

Tech Data CEO talks publicly first time after 11-month accounting probe

Tech Data CEO Bob Dutkowsky has finally been untethered.

For 11 months, the loquacious head of Tampa Bay's biggest public company was prevented from making public comments while regulators and an internal team investigated an overseas accounting debacle that forced Tech Data to restate its earnings.

During an earnings conference call Tuesday morning with analysts and followup interviews, Dutkowsky described how the Clearwater technology distributor was rebounding with improved efficiencies, higher customer service scores and a new software deal with a major U.S. customer. He talked about a renewed focus on the U.S. side of the business and opportunities to sell products tied to cloud computing and security for mobile devices.

The one thing he didn't want to chat much about: the accounting scandal.

An SEC filing earlier this month outlining the results of an internal investigation in broad terms "is the one and only document you'll see from the company about the restatement process," Dutkowsky said in an interview with the Tampa Bay Times. "I'm not going to comment beyond what's in there."

The inquiry focused on vendor accounting "improprieties" within the company's United Kingdom subsidiary. The cumulative effect of the restatement was to reduce net income by about $27 million.

Dutkowsky said management "self-reported the problem" and the subsequent investigation "was managed by the board and not by management."

The board "had complete and total access" over delving into issues and deciding who was asked to leave the company, he said. "That's partly why it went on for 11 months. … We're able to go back to our shareholders and say we've found the problems. … We investigated it, and the people who were part of it aren't with us any more."

Dutkowsky would not discuss how problems were uncovered internally or who was fired as a result. He also would not discuss the number of employees involved or how high up in management the problem went.

"Suffice it to say, as the 10(k) (annual report filing) says, the people who are responsible are no longer with this company."

Asked about any ongoing civil or criminal investigations in both the U.S. and Europe, Dutkowsky responded, "That's out of our hands." The company said it has continually cooperated with both the SEC and European authorities.

The IT landscape is markedly different from the last time Tech Data held a conference call, some 350 days ago, Dutkowsky said. Back then, cloud computing was new on the horizon; now it's everywhere. Back then, cellphones were hot; now the focus is on managing and providing security for mobile devices. Back then, the standard server market "was on fire"; now profits are down and the industry is clustered around low-cost servers and using the cloud.

Dutkowsky said it was hard to stay mum so long to the company's 9,000-plus employees, 125,000 global customers, 500 vendors "and the community we live and work in."

The challenges have tested the company, he told analysts, "but as I've said before … I believe strong companies are made even stronger in tough times."

His comments came after Tech Data Corp. disclosed third-quarter profits slipped, in part because it was clipped by $15 million in restatement expenses.

Net income for the fiscal quarter ended Oct. 31 was $37.7 million, or 99 cents a share, down from $42.9 million, or $1.13 a share, in the year-ago period. Net sales were $6.4 billion, up 6 percent from $6 billion a year earlier.

Even without one-time charges, net income still fell shy of analysts' expectations. But the company projected improving results in the fourth quarter.

The company's stock closed Tuesday at $57.49, down 76 cents per share or just over 1 percent.

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