Tech Data CEO: Networking, Security Demand Remain Strong

Amid a weaker-than-expected quarter for Tech Data (NASDAQ: TECD), CEO Bob Dutkowsky points to three bright spots: The company's own execution -- plus continued industry demand for network and security solutions. Moreover, there are even signs of an improving PC market.

Tech Data's net sales were $6.4 billion in Q2 2017, down 3 percent from Q2 2016. Net income slipped t0 $46.4 million, down from $76.4 million in the prior-year quarter. During an interview with ChannelE2E today, Dutkowsky pointed to overall IT industry weakness -- with spending down in both the U.S. and Europe.

Still, Tech Data largely met its profit goals for the quarter. Dutkowsky credited the company's employees for hitting that goal while allocating the right amount of dollars on R&D, marketing, sales, partner training and so forth.

Cloud Stealing More Revenues?

Pointing to Tech Data's software-than-expected revenues, I openly wondered if cloud services were starting to take an "unfair share" of the IT market.

Dutkowsky didn't see it that way. Tech Data expects partners and customers to live in a hybrid world for the long haul. And even if some applications shift to the cloud, customers will still demand robust network infrastructure and security to reach those workloads, he said.

Building on that point, Dutkowsky said Tech Data's data center sales were essentially flat in the quarter, while network and security sales were strong.

On the cloud services front, Tech Data's own cloud revenues are now on a $300 million annual run rate -- built atop the StreamOne platform. That's a relatively small figure compared to the company's top line, but an impressive figure compared to thousands of cloud startups that are still trying to achieve critical mass.

PCs, Mobile Devices & IoT

There was mixed news on the PC and mobile front. PCs and laptops sales were better than expected -- reinforcing yesterday's quarterly results from HP Inc., where device as a service offerings are starting to gain momentum.

Still, Tech Data saw weakness in its mobile business -- where devices like smartphones and cell phones are sold.

In Q2, three of vendor partners represented 10% or more of Tech Data's sales: Apple represented 17%, HP Inc. was 14% and Cisco was 11%, according to CFO Chuck Dannewitz, who shared the stats on the earnings call.

Looking ahead, Tech Data continues to invest heavily in emerging opportunities like the Internet of Things.

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.