A good overall IT demand environment and strong execution contributed to record Q3 sales and double-digit non-GAAP earnings growth says distributor Tech Data. 
CEO Bob Dutkowsky (above): “In Q3, our market focused teams responded to robust demand for PC in both regions and mobility products in Europe. Our operational focus drove good margin and expense management, resulting in excellent operating leverage. Our expansion in Europe has been at a quicker pace than anticipated this year.”
Tech Data third quarter worldwide net sales increased 6% year-over-year to $6.8bn, driven by solid demand and strong execution in both regions, he says. Excluding the negative impact of the weakening of certain foreign currencies against the dollar, net sales increased approximately 9% over the previous Q3.
European regions net sales reached a Q3 record $4.1bn, an increase from the prior year of 8% U.S. dollars and 13% in euros. “This top line performance exceeded our expectations and reflects our teams’ ability to respond effectively to a stable and generally improved IT demand environment across most of the region. All but one of our European trade regions posted solid year-over-year growth with France, the Nordics, Iberia, Italy and Switzerland delivering double-digit sales improvement. At a product level, the European regions’ growth was fueled by continued strong demand for PCs and mobile products, offset by weaker demand for data centre products. The first nine months of fiscal ’15, our European regions’ sales grew 10% to $12.5 billion, an increase of 8% in euros.”
Worldwide gross profit grew to $335 million in Q3, resulting in gross margin of 4.95% compared to 5.12% in the prior year quarter. The year-over-year decrease in gross margin percentage is primarily attributable to the changes in customer and product mix, including higher sales of lower margin products, namely PCs in both regions, and mobility products in Europe compared to the prior year quarter. For the first nine months, worldwide gross profit grew approximately 6% to approximately $1 billion with a gross margin of 5.03% compared to 5.12% during the prior year period
Looking forward he says there will be opportunity to sell replacement servers, just like-for-like, industry standard to industry standard servers, “maybe with a little bit more horsepower, more modernized engines inside; but there will also be an opportunity to look at consolidating servers, sell larger servers with more virtualisation”.
“That says there’s more software opportunity for Tech Data, there’s more configuration opportunities for Tech Data. So it’s going to play out in lots of different ways, depending on the environment and the arena, and we’re active in all fronts to make sure that we take advantage of the opportunity next year.”
The European data centre business was down year-over-year, while American data centre business was up year-over-year. “That breaks a trend over the last few quarters where Europe was leading the data centre performance inside Tech Data, so I don’t think that that’s reflective of Tech Data’s performance in the data centre. I think that’s more reflective of the demand in the European data centre space, and if you listen to the results of the vast majority of our vendor partners as they reported their results, server and storage and networking partners in particular, they talked about softness in the European data centre market.”
“An upside for our model is in the cloud, as literally tens of thousands of resellers need a pathway to the cloud and the vendors don’t know how to get them there. That will be our job and our opportunity. Clearly the Internet of Things represents an explosion of new devices, and all of those devices are going to put pressure on networks and the data centres of the world, so more servers, more storage, more networking. Lastly, to make all of that be secure, there will be a whole new set of vendors and new sets of technology that will focus on security, so those are three areas that we have a strong presence in,” he concluded.
