Tech Data Pursues $100 Million In Cost Savings Post ATS Deal

Tech Data, which recently acquired Avnet Technology Solutions for $2.6 billion, expects the deal to deliver considerable cost savings over the next two years. Moreover, CEO Bob Dutkowsky and CFO Chuck Dannewitz sound confident that the distributor can keep Tech Data focused on execution even as the company digests and integrates ATS into the overall business.

"We expect to achieve approximately $100 million of cost savings within 24 months ," said Dannewitz during an earnings call yesterday. "With $50 million in the first 12 months and another $50 million in the second year for a combined cost savings of $100 in the second full year."

Tech Data did not disclose if our how many jobs will be consolidated as part of that $100 million savings goal.

Tech Data: Recent Performance

Tech Data's business appeared to be performing well ahead of the ATS deal. For its latest quarter, Tech Data revenues were $7.4 billion -- down 1 percent from the corresponding quarter last year. That's actually a reasonable showing, considering the intense pressure distributors face as customers shift IT spending from on-premises data centers to public clouds.

"Our strong Q4 results capped a historic year for Tech Data, a fiscal year of significant strategic progress and strong financial performance," Dutkowsky said during yesterday's call. "In fiscal 2017, we achieved all of our primary financial objectives."

Those achievements, he added, arrived "despite a dynamic global, geopolitical and economic environment, a significant vendor consolidation, and an evolving IT consumption model. On top of this, we recapitalized the company and entered into the largest, most transformative acquisition in our company’s history, which we completed last week."

Tech Data & Avnet: What's Next?

While no M&A deal is easy, market pundits see potential opportunities ahead for both Tech Data and Avnet.

For instance, Tech Data gains geographic reach and data center product diversity, noted The 2112 Group:

On the flip side, Avnet -- now free of its Technology Solutions business -- can likely accelerate its own Internet of Things (IoT) strategy in such areas as embedded and automated machine-to-machine (M2M) technologies, the research firm noted.