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By | Paul Kunert 27th May 2016 13:53

Tech spending in Europe is slowing, a fatter Tech Data belches

Don't disturb piggy at the trough, he's busy

Tech Data has said it is countering the slowdown in IT spending across Europe by nabbing market share from Ingram Micro rivals, though it stopped short of naming those leaky ships it is pinching business from.

The IT distie titan reported group sales of $6bn, up one per cent year-on-year for Q1 ended 30 April; revenues in the Americas and Europe were up two and one per cent respectively to $2.4bn and $3.6bn.

CEO Bob Dutkovsky told analysts on a conference call that its teams made the most of “pockets of demand and delivered above market sales growth”.

The Americas pursued the “right mix of business, gained select market share” and “deselected less profitable business”. The exec said the US team has moved technical and field sales folk to higher growth areas of cloud, supply chain and unspecified services.

Over in Europe, a stumble in data centre related kit sales and a “sharp decline” in mobility products across most of its handset vendors were offset by notebooks, tabs, software, consumer electronics and security.

In fact, Tech Data is putting together a stand-alone security business unit across many countries, and yesterday confirmed to us that one is being erected in the UK.

According to channel analyst Context, tech spending in Europe during Q1 declined to €14.5bn, down from €14.7bn, though part of this decline is certainly attributable to Easter falling in March this year with Catholic countries downing tools around that time.

Tech Data's growth in Europe during recent quarter was in the mid-single digit range, so the latest numbers represent a slowdown.

Dutkovsky said it had swiped share from rivals but added that Dell opening up more business to the channel had also helped sales bulk up: “Market share gains don’t just come at the expense of the competitors”.

Asked by an analyst if Ingram Micro, which is being bought by Chinese conglomerate HNA Group and recently reported pretty crappy sales for Europe, was one of Tech Data’s victims, the exec refused to comment.

Gross profit was $298.8m, some $6.7m higher than a year ago due to the sales increase. Gross margin was up by five basis points to 5.1 per cent and a richer mix of higher margin stuff was at play here.

Operating expenses jumped to $246m from $209m but this was almost entirely related to a $38.5m settlement from LCD vendors for price fixing that was paid to Tech Data in Q1 of fiscal ’15.

This caused a drop in operating profits, which slipped to $52.5m from $81.9m. After tax and interest expenses, net profit was $33.3m versus $51.27m. ®

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