Sequential growth a good sign for distribution

December is around the corner and 2009 is drawing to a close, but there’s much anticipation around consumer buying patterns this holiday season – that will be an indicator of whether consumer confidence is up and whether spending will start to pick up in 2010.

Regardless of what happens in the next month, there are some encouraging trends that could point to a year of recovery ahead – albeit a slow one. While disties and vendors alike have still been reporting declines, in many cases revenues are up sequentially. And that’s a good thing.

Tech Data (NASDAQ: TECD), for example, has reported that net sales for its third-quarter earnings declined 8.1 per cent over the same period last year, but saw an 8.8 per cent increase over the last quarter. And these earnings beat Wall Street expectations.

Late last month, Ingram Micro (NYSE: IM) announced better-than-expected third-quarter results, which appeared to actually surprise CEO Greg Spierkel. While sales fell 11 per cent over the same period last year, sequentially sales increased 12 per cent. Perhaps most importantly, the distie saw unit shipments more than double.

Sure, this could be attributed to a better demand environment, but perhaps it has something to do with Ingram’s more positive outlook – rather than focusing on doom and gloom and cost-cutting measures, as it did in the first half of the year, Ingram is now focusing on demand-generation with vendors and customer, such as customer analytics. And this approach seems to be paying off.

Tech Data has been taking a similar approach, developing its specialized business units and focusing on value-add. The distie sees upcoming opportunities for its channel partners in areas such as healthcare, mobility, unified communications and network security, as well as open source. Specialty distributors have been doing the same.

We’re also seeing sequential growth coming from the vendors. While HP, for example, saw revenue decline eight per cent in the fourth quarter over the same period last year, sequentially revenue was up 12 per cent. As a result, it’s upped its previous revenue forecast for 2010. More importantly, it saw improvements in printing and PC sales as customers make the switch to Windows 7.

Then there’s Dell. While revenue declined 15 per cent in the third quarter over the same period last year, sequentially it climbed one per cent. While this isn’t a huge jump, and it didn’t meet analysts’ expectations, there was underlying good news: Its enterprise server and storage revenues were up, as were shipments to SMB customers. In a statement, Dell Chairman and CEO Michael Dell said the company is seeing improvement in overall underlying IT demand that is continuing into the fourth quarter.

So, while we may not see a huge growth spurt next year, the market seems to be slowly picking itself up and putting itself back together – and 2010 isn’t looking so bad after all.

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Jim Love, Chief Content Officer, IT World Canada

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Vawn Himmelsbach
Vawn Himmelsbach
Is a Toronto-based journalist and regular contributor to IT World Canada's publications.

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