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Tech Data posts strong quarter, enjoys stronger outlook

On a day when the Dow plummeted 358 points, Tech Data Corp. watched its shares soar as the Clearwater technology distributor and Tampa Bay's largest public company by revenues reported strong earnings. Shares rose more than 13 percent Thursday to over $63, erasing in one day almost exactly the stock's decline since the start of 2015.

In an interview, CEO Bob Dutkowsky said Tech Data revenues grew 8 percent across all of its markets in an IT industry that is expanding at average 4 percent pace. That means, he said, that Tech Data is taking market share away from other companies.

"That is why we are so enthused by this quarter," he said, calling the three months ended July 31 a record performance for this quarter in the company's 40 years. "A well-run company that sells a lot and does not make money is not a well run company."

At first glance, Tech Data revenues appeared to shrink in the quarter because sales in countries with weaker foreign currencies translated to fewer dollars because of the strong U.S. currency.

Dutkowsky said the "world looked right through the foreign exchange issue" with investors rewarding Tech Data with a strong bump to its share price on an otherwise painful day in the markets.

For the second quarter, Tech Data reported a 4 percent drop in sales to $6.6 billion from $6.8 billion. Excluding the impact of weaker foreign currencies, sales would have increased 8 percent. Tech Data also said quarterly net income jumped to $76.4 million from $39.3 million a year earlier.

Speaking to the Tampa Bay Times, Dutkowsky — who received $7.6 million in compensation this past year, up from $1.7 million in 2014 — touched on several key reasons for the company's performance.

• In Europe, where Tech Data conducts 60 percent of its business, the company has bought and consolidated 20 businesses in the past decade to strengthen its depth in the market. Dutkowsky said Europe's economy is heavily made up of small businesses — witness how few Fortune 500 giants are based there — and Tech Data has long catered to smaller firms.

"We had several countries that grew double digits in Europe in the quarter. Germany, Benelux, Italy and Iberia were strong," the CEO said. "So it's not a Northern Europe-Southern Europe challenge like it typically is."

• Tech Data earlier this year decided to sell its businesses in three Latin American markets — Chile, Peru and Uruguay — because they generated little if any profit. Earlier, Tech Data also had reined in its Brazilian business out of frustration in operating in that country. "This frees up our management and money to invest in our core Americas markets," Dutkowsky said, including the United States, Canada and Mexico.

• Dutkowsky stressed the importance of maintaining a "talent pipeline" at Tech Data because the IT distributor runs a thin-margin business that requires both well-oiled execution — 99 percent of the thousands of products ordered daily are sent the same day — and also the brains and courage to bet on what next hot IT products will be in demand.

Last year, he said, PCs were on the front burner as companies looked to refresh their stock. Now it is "anything mobile," he said, citing smartphones, tablets and notebooks, as well as data center products like servers. The arrival of Windows 10 may also gather momentum. Wednesday night, Tech Data honored 20 of its MBA graduates who completed a Tech Data-tailored master's program designed in conjunction with Saint Leo University.

Ahead, Dutkowsky said he wants to better balance Tech Data's geographic market share, aiming toward a 50-50 sales mix between Europe and the Americas. Toward that end, Dutkowsky cited the recent purchase of a Phoenix-based business called STG that Tech Data will use to help its customers — typically tech companies that in turn sell to end users — that need to assemble more complex IT systems. That is higher-margin work, noted Dutkowsky, which can only help Tech Data's bottom line ahead.

"I like to say we sell from the living room to the data center," said the CEO, who celebrates nine years at the company in October. "That makes us very diversified."

And on Thursday, well liked by investors.

Contact Robert Trigaux at rtrigaux@tampabay.com.

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