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Tech Data boss says turn around well under way

Distributor looks to other vendors such as Acer, EMC and Sun to make up for lost HP business because of its hybrid business modelrn

Clearwater, Fla.-based Tech Data posted better than forecasted numbers. The company, which is celebrating 30 years in business, reported an increase of 9.6 per cent in net sales for the second quarter. Operating income for the second quarter was US$49.9 million, or 1.09 per cent of sales, an increase

from US$27.3 million, or .65 per cent of sales, in the second quarter of fiscal 2004.

“”We are benefiting from a resumption of growth in IT demand since last year,”” said Steve Raymund, CEO of Tech Data.

In Canada, Tech Data’s operation is enjoying 12 months of continuous growth. Raymund believes that beyond managing expenses and providing customer satisfaction, the market has stabilized in all major regions of Europe and North America. “”We are not seeing any deterioration, however there’s no robust double-digit growth either.””

Raymund’s biggest concern is with the company’s HP business, which by all accounts is the distributor’s marquee brand.

At the end of the second quarter in the U.S., HP’s hybrid model has led to a four per cent drop off for Tech Data.

“”We clearly as a distributor lost share with HP bypassing us to sell direct to end users and resellers. But, we picked up business elsewhere and made up the losses. Supplies with HP and others are up, connectivity, VoIP, security, data capture, POS, digital imaging and other product areas (have made up the difference),”” he said.

The company’s HP business is also a concern this side of the border. Rick Reid, president of Tech Data Canada of Mississauga, Ont., acknowledges his parent company’s position with regards to HP’s hybrid business model.

“”No question HP taking systems partner direct has had a devastating effect, but it has been less dramatic here in Canada,”” Reid said.

However, he added that HP has lost some share in the commercial space battling Dell Computer, while increasing its market share in the consumer space, an area Tech Data does not play in.

“”They have been hurt by Dell and they need to change the way they go to market and focus on price enhancements continue to work with the channel and they should turn things around,”” he said.

Raymund emphasized that HP remains his company’s largest vendor and he views the Palo Alto, Calif.-based computing giant as a valued partner. However, other vendors namely Acer, which has a more channel friendly business model, is growing in importance inside Tech Data U.S.

Tech Data also made strategic bets on EMC and Sun over the past few months. Raymund said EMC is gaining momentum in the market place, while Sun is still in its early days after suffering financial woes over the past few years.

“”Our role as a wholesale distributor is to provide (resellers) with alternatives with leading IT products and EMC and Sun falls into that definition,”” Raymund said.

EMC has signed an agreement with Tech Data in Canada for its entry level products.