UPDATE 3-Tech Data sees weak first-qtr sales, shares fall

Tue Mar 2, 2010 12:23pm EST

* Q4 EPS $1.35 vs est $1.01

* Q4 rev $6.28 bln vs est $6.03 bln

* Sees Q1 rev up in mid-single digit range y-o-y

* Shares fall 8 pct (Adds conference call details, analyst comments, updates share movement)

By Mansi Dutta

BANGALORE, March 2 (Reuters) - Tech Data Corp (TECD.O) posted fourth-quarter results that beat estimates by a wide margin, but its shares slipped more than 8 percent as it forecast weak revenue growth in the first quarter. The technology products distributor said it expects first-quarter net sales to increase in the mid single-digit percentage range.

Analysts on average projected revenue of $5.48 billion for the period, a growth of about 10 percent from last year.

"The reason the guidance is less than what the Street expected, at least on the top line, is because they're intentionally walking away from some larger price aggressive deals," said Needham & Co analyst Richard Kugele.

"And when you do so, typically, your gross and operating margins are better."

It's just a business decision on where the company wants to play to drive operating performance and no negative signal on IT spending, he added.

Tech Data remains optimistic on the IT spending environment and said it expects to achieve operating margins of 1.5 percent before stock compensation expense, by 2013.

The company's below-normal outlook for the first quarter reflects its focus on profitability over revenue growth amid an intensifying pricing environment, said Goldman Sachs analyst Craig Hettenbach in a note.

Tech Data along with rivals Ingram Micro (IM.N), Avnet Inc (AVT.N) and Arrow Electronics (ARW.N) is considered a barometer of corporate technology spending. It distributes products for Hewlett-Packard Co (HPQ.N) and Apple (AAPL.O) among others.

MARKET-BEATING RESULTS

For the fourth quarter ended Jan. 31, the company said its net income attributable to shareholders rose to $70.1 million, or $1.35 a share, from $57 million, or $1.14 a share, a year ago.

Revenue rose 10 percent to $6.28 billion, helped by sales growth across both markets it operates -- Americas and Europe.

Analysts on average were looking for earnings of $1.01 a share, excluding items, on revenue of $6.03 billion, for the fourth quarter, according to Thomson Reuters I/B/E/S. Sales in the United States grew nearly 7 percent year-over-year.

"This was our first fourth quarter sequential increase in five years," the company, which distributes products from personal computers to microchips, said on the conference call.

The Americas had a strong close to the year and a good business mix, yielding operating margin of 1.75 percent, Tech Data said.

Last month, Ingram Micro reported better-than-expected results as corporate IT spending bounced back, but forecast margins below expectations. [ID:nN18229777]

Tech Data shares were down $3.57 at $41.26 in midday trade Tuesday on Nasdaq. (Reporting by Mansi Dutta and Saumyadeb Chakrabarty; Editing by Anthony Kurian, Gopakumar Warrier)

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