An unprecedented volatility in foreign exchange rates last month put a severe crimp in third-quarter profits for Tech Data Corp.
The Clearwater computer products reseller said net income for the period that ended in October fell 55 percent to $18.4-million, compared with $40.9-million in the same quarter last year.
Typically, foreign currency changes aren't significant to the company's operating results, but October was far from typical as the value of the dollar surged relative to the euro, the Canadian dollar and the Brazilian real.
The key drain was a net foreign currency exchange loss of $23.5-million, three-fourths of that associated with the company's European operation. In the same quarter last year, Tech Data had posted a net foreign currency gain of $2.4-million.
Tech Data's European unit got caught between purchasing products for a fixed amount in U.S. dollars and, by the time a sale was finalized, posting a transaction loss in euros.
Currency issues aside, Tech Data chief executive Bob Dutkowsky said the company outperformed its peers in a tough environment. Sales rose to $6.1-billion, up from $5.9-billion in the prior-year quarter, with sales of software, laptops and networking products leading the way.
Because of the market's volatility, Tech Data has stopped giving future earnings guidance. But Dutkowsky said that in general, spending on information technology, which had been growing at 4 to 6 percent annually, has slowed worldwide.
"My guess is that IT earnings spending today is flat and probably in the next few quarters could even decline from there," he said in an interview.
Tech Data has about 8,200 employees worldwide, including 1,600 in the Tampa Bay area, flat numbers from a year ago. There have been no sizable layoffs, Dutkowsky said.
Jeff Harrington can be reached at [email protected] or (727) 893-8242.