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Tech Data to plow more into Europe
By JEFF HARRINGTON, Times Staff Writer
With U.S. customers cutting back on orders more than expected, Tech Data Corp. is investing more overseas. The Clearwater distributor of computer products and services on Monday outlined plans to boost capital spending in Europe as it disclosed overall third-quarter revenues had dropped 9.6 percent in the period ended Oct. 31, from $4.2-billion a year ago to $3.8-billion. Net income rose 15 percent to $32.8-million, or 57 cents a share, compared with $28.5-million, or 51 cents per share, in the 2001 quarter. The year-ago period included a $7-million charge to write off software. Excluding the charge, income was off by 1 percent. The results matched the consensus estimate of 10 analysts covering Tech Data. Tech Data chief executive Steve Raymund gave investors little hope for a quick rebound. But he said that won't prevent his company from spending more money on upgrades even if customers won't. Among the biggest multimillion-dollar projects on the company's plate is to bring all European operations onto the same computer network. Currently, the company's infrastructure varies country-by-country overseas. "While it is difficult in a flat market to invest capital and resources, it is without question the right thing for us to do," Raymund told investors in a conference call late Monday. Tech Data's capital expenditure budget is expected to rise from $75-million this year to as much as $100-million in 2003, but Raymund and other executives declined to break out the European investment. In the third quarter, sales were evenly split between the United States and Europe, with each accounting for 47 percent of sales and other international sales accounting for the balance. But sales in the quarter fell 18 percent in the United States compared with a 3 percent rise in Europe sales. The rise was partly due to the strong euro; on a local currency basis, third-quarter sales in Europe were down 5 percent. In an interview, Raymund said he expects European sales to outpace U.S. sales, at least for the short term. Heading into the fourth quarter, he predicted U.S. sales will be softer than anticipated. The United States isn't the only geographic area suffering. Non-European international sales, including Latin America, were down 17 percent in the quarter. Tech Data said it is negotiating to sell its Argentina operation to local management and intends to scale back Brazilian operations. It anticipates a fourth-quarter charge of $2-million to $4-million in connection with the cutback. Tech Data chief financial officer Jeffery P. Howells would not disclose revenue in the two countries except to say it is small. Within Tech Data's various lines of business, the sole bright spot was software, where sales rose 11 percent. Sales of computer peripherals, networking and systems declined by 17 percent, 9 percent and 8 percent, respectively. The company proclaimed its balance sheet is in its best-ever shape, having cut $1.3-billion in debt since January 2001 and with further debt reduction under way. To take advantage of the strong euro and its growing cash portfolio overseas, Tech Data said it will repatriate about $70-million in capital from Europe, resulting in a currency exchange gain of about $10-million. Looking ahead, Tech Data projected flat sales of $3.8-billion to $3.95-billion in the fourth quarter with net income fluctuating between $31-million and $34-million, or 53 cents to 58 cents per share. Earnings were released after the close of markets Thursday. Tech Data stock closed at $33.27 a share, down 79 cents or 2.3 percent. -- Jeff Harrington can be reached at harrington@sptimes.com or (813) 226-3407.
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From the Times Business report
From the AP
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