5350 Tech Data Drive
Clearwater, Florida 33760-3122
Telephone: (727) 539-7429
Toll Free: (800) 237-8931
Fax: (727) 538-7803
Web site: http://www.techdata.com
Sales: $19.79 billion (2004)
Stock Exchanges: NASDAQ
Ticker Symbol: TECD
NAIC: 421430 Computer and Computer Peripheral Equipment and Software Wholesalers
Tech Data Corporation is one of the world's largest distributors of computer products. The company's customer base is composed of over 90,000 value-added resellers and retail dealers located in more than 100 countries. Its product line contains more than 75,000 different items, including computers, printers, monitors, disk drives, networking equipment, and software. Tech Data distributes products from 1,000 manufacturers and publishers. Tech Data was Florida's largest publicly held firm, according to Florida Trend. Keys to the company's success in a low-margin, rapidly changing market include attention to detail and low debt levels.
When Tech Data was founded in 1974, it bore little resemblance to the industry giant it has grown to become. The company was started by Edward Raymund to market computer supplies to large institutions in central Florida. Its customers at that time were end-users rather than resellers, primarily hospitals and government agencies. From Tech Data, these end-users purchased disk packs, tape, and other data-processing paraphernalia for use with their mainframe and mini computers.
By the early 1980s, the company had annual sales of about $2 million. Around that time, several developments both inside the company and in the computer industry as a whole led to profound changes in the way Tech Data was to do business. The emergence of personal computers (PCs) in 1980 created an exciting new market niche that was wide open for exploitation. When Raymund decided to pursue a share of the market for PC supplies, however, he met with resistance on the part of his field sales force. Raymund's plan involved the expansion of the company's telemarketing operation, and the field sales staff, which relied on large institutional customers, perceived this as a threat to their dominant position in the company.
Also during this time, Steven Raymund, Edward's 25-year-old son, came to work for the company. Put to work on the upcoming Tech Data catalog, Steve initially had no intention of making the situation permanent. Gradually, however, his interest in the company's operations increased. As the elder Raymund began spending less time at Tech Data to concentrate on his other company, Tech Rep Associates, Steven Raymund took on more responsibilities, eventually becoming operations manager at Tech Data. This development did not sit at all well with the sales force, which had hoped to buy the company out from Raymund in the near future; Steven Raymund's sudden rise to prominence meant that a buyout was unlikely.
About a month after Steven Raymund received his new title, a group consisting of Tech Data's key salespeople staged a coup of sorts. Five of them gathered at the office on a Saturday and proceeded to photocopy all of the company's customer records and vendor information. The following Monday, Raymund found letters of resignation on his desk from the five, who then went to work for a nearby competitor. The impact of this mass desertion at Tech Data was immediate and brutal. It quickly became apparent that the salespeople had taken many of the company's best customers with them. Monthly sales figures dropped by more than 50 percent, and the company began losing money. In fact, the situation became so bad that the elder Raymund considered shuttering Tech Data so that he could devote more resources to his other company, which was thriving.
Instead, the Raymunds undertook a radical shift in strategy. Rather than replace the departed field sales force, they beefed up their telemarketing staff, which was much less expensive to support. They then began to aggressively court computer dealers in addition to end-users. The company also began to pay more attention to direct mail, purchasing mailing lists and sending out catalogs in greater numbers. By the middle of 1983, Tech Data was once again making money. About that time, the company began dealing in PC products such as disk drives, printers, and keyboards. Selling to dealers rather than users proved so successful that by the end of fiscal 1984 the company had withdrawn from the end-user market entirely, and its transformation into a wholesale distributor was complete. That year, Steve Raymund was named chief operating officer, and the following year he became chief executive officer.
In 1986, Tech Data offered its stock to the public for the first time, entering the market at $9.75 a share. Annual sales had reached $37 million by this time. Marketing primarily to value-added resellers, which sold computer equipment and supplies to small and medium-sized businesses, Tech Data grew at a remarkable rate through the rest of the 1980s. Sales nearly doubled in 1987, reaching $72 million. The company doubled its sales again, to $149 million, the following year.
In 1989, Tech Data made its move northward with the acquisition of ParityPlus, a modest Canadian microcomputer distributor. The Canadian operation, purchased for just over $1 million in cash, was subsequently renamed Tech Data Canada. By the end of fiscal 1989, the company's coast-to-coast network of ten distribution centers was in place, and its work force had grown to 430. Sales for the year were $247 million.
After reporting impressive earnings for several years in a row, Tech Data stumbled slightly in 1990. Although its sales grew to $348 million for the year, the company's net income was cut in half. This off year was attributed in part on the bankruptcy of a major customer, Bulldog Computer Products of Atlanta, which cost Tech Data $1 million. Mismanagement and theft of inventory, including accounting errors and reported thievery at the company's Los Angeles warehouse, resulted in another $4 million in red ink. Raymund reacted to these problems with a combination of tightened inventory controls and cost-cutting measures. The company's executive rank was thinned out, and the frequency of inventory checks was switched from yearly to quarterly.
By 1991, Tech Data had turned things around. That year, Steve Raymund succeeded his father as chairman of the company's board of directors. Tech Data had settled in among the top five computer distributors in the United States and was an acknowledged leader in the distribution of local area network (LAN) and network products. For the year, Tech Data reported earnings of $6.7 million on sales of $442 million. The company began stocking the products of several well known manufacturers around this time. Among the companies whose wares Tech Data began selling in the early 1990s were Compaq, Conner Peripherals (a leading maker of disk drives), Toshiba, and Lex-mark (a typewriter and printer spin-off of IBM).
By 1992, the company had about 25,000 customers, 70 percent of which were value-added resellers. The rest consisted of large national retailers. In March 1992, Tech Data added software to its line for the first time, helping to close the gap between Tech Data and its largest competitors, Ingram Micro and Merisel, Inc., where software was already generating about 40 percent of those companies' revenues. Forty software companies were quickly added to Tech Data's list of suppliers.
Tech Data also benefited increasingly from the desire on the part of PC manufacturers to cut distribution costs. Since selling to a distributor required less effort than selling directly to dealers, more and more producers of computer equipment were drawn to companies like Tech Data as the most efficient channel for selling their goods. Eventually, even the largest companies in the computer industry began to feel that selling through wholesale distributors was necessary if they were to remain competitive with such up-and-coming concerns as AST Research and Dell.
For fiscal 1992, revenues at Tech Data rose to $647 million. In January 1993, Tech Data made an important breakthrough when it received authorization to begin selling certain Microsoft system and application software products to value-added resellers. IBM and Apple were also added to the list of companies whose products were available through Tech Data. With these major producers in the fold, Tech Data's numbers jumped impressively once again. The company reported earnings of $19.8 million on sales of $979 million for 1993. During that year, Tech Data also sought to expand internationally, and, toward that end, an export division was established early in the year. Based in Miami, the division was designed to serve the Latin American market.
Tech Data's Mission: Tech Data's mission is to maximize shareholder value by providing the high-quality core services that our customers and vendor partners need to cost-effectively sell, deploy and support world-class technology solutions. Tech Data's Business Values: Integrity. The foundation of our business is integrity. All interactions with customers, vendors, suppliers, shareholders and fellow employees are conducted with integrity and mutual respect. Employees: Our employees make the difference! We invest in the development of our employees and provide a professional, challenging and rewarding environment. Partners: Strategic business partnerships with customers, vendors and suppliers produce benefits for all our business partners. We conduct our business in a manner which supports our business partners. Shareholders: Our focus on profitability attracts sufficient capital for our continued growth and ensures a reasonable return on our shareholders' investments in our company. Change: Our business continues to evolve based on ever-changing market conditions. Our willingness to embrace change is the key to our continued success.
For fiscal 1993, Tech Data's sales increased 57 percent to $1.53 billion. Record earnings of $30.2 million were reported as well. In a flurry of activity, the company announced the addition of several major software companies to its line of offerings. In January 1994, Tech Data completed the acquisition of Software Resource Inc., a software distributor based in Novato, California. This acquisition enabled the company to begin offering several well known software lines, most importantly those of Borland International and WordPerfect Corporation. In March, Tech Data beefed up its international operations with the acquisition of Softmart International, S.A., a privately-held French distributor of PC products. The list of software companies represented in Tech Data warehouses grew in 1994 with the inclusion of Lotus, Aldus, and Computer Associates.
In the mid-1990s, Tech Data appeared to be narrowing the margin by which it trailed its larger competitors, Merisel and Ingram. By devoting a greater share of its work force to customer support and shoring up its software business and international operations, Tech Data stood to increase its overall market share, further solidifying its position as a leader among distributors of computer products.
Revenues exceeded $2 billion in 1994. Tech Data's inventory, worth $350 million, included 20,000 products from 600 manufacturers. As Tech Data's volume grew, the company was spending $29 million on a new computer system, nearly the equivalent of its $30 million net income. It also invested heavily in training for its 450 sales reps and 130 technical support people who handled thousands of calls every day on behalf of its 45,000 customers. The workforce was growing rapidly, exceeding 2,600 employees by 1996. Computerworld ranked it second among the best places to work due to compensation, the potential for advancement, and other factors.
Unfortunately, the new computer system crashed in 1995. A number of customers and investors took their business elsewhere. However, noted Florida Trend, Tech Data was able to turn yet another crisis into a launching pad for the next stage in its growth. By 1997, it was reporting record profits and annual revenues of $4.6 billion, and its stock price was twice pre-crash levels.
An enduring side benefit of the computer upgrade was e-commerce capability; 40 percent of Tech Data's orders were handled online by 1997. Soon (before rival Ingram Micro), the company was building Web-based storefronts for its customers, reported Computer Reseller News. By this time, Tech Data was the world's second-largest PC distributor but had less than half the revenues of Ingram Micro, which had recently acquired the distribution operations of another large rival, Intelligent Electronics Inc., and was buying up overseas companies as well.
Traditionally known for organic growth, Tech Data expanded its international operations in the late 1990s through acquisitions. In 1997, it bought a 77 percent controlling interest in the $1 billion German PC products distributor Macrotron AG. This was sold to Ingram Micro the next year, however, in the aftermath of a larger acquisition.
In 1998, the company paid Klockner & Co. AG $395 million in stock for its 80 percent holding in Munich-based distributor Computer 2000 AG (the remaining shares were picked up in 2000). This purchase lifted Tech Data's total revenues to nearly $12 billion, noted Computer Reseller News. Computer 2000 had operations in more than 30 countries, some (in the Middle East and South America) new to Tech Data, but its own expansion quest had failed after heavy losses after it bought U.S. distributor AmeriQuest Technologies. After putting the company's U.S. operations in the hands of company president Tony Ibarguen, CEO Steve Raymund temporarily moved to Paris to be closer to the expanding business in Europe.
In the western hemisphere, Tech Data set up distribution centers in Sao Paulo, Brazil and Miami. Globelle Corporation was added in 1999, doubling the size of Tech Data's Canadian business north of the border.
Sales were about $20 billion in 2000. The rise of the Internet had helped the information technology (IT) market grow. However, some distributors were failing even before the tech bubble burst, including CHS Electronics, one of Tech Data's nearer rivals, which collapsed in 1998. Demand slowed and more buyers bought directly from manufacturers such as Dell. As the market slowed, Tech Data cut its workforce by one-fifth in 2001.
Revenues slipped to $15.7 billion for the fiscal year ended January 31, 2003. In March 2003, Tech Data bought Europe's Azlan Group, a distributor of networking products, for $227 million. CEO Steve Raymund was steering the company towards new technologies in IP telephony, the digital home, and IT convergence, he told Computer Reseller News.
As noted by Computer Database, severe competition awaited distributors beginning to benefit from an improving economy. Nevertheless, Tech Data's sales again approached $20 billion in the fiscal year ended January 31, 2005. Tech Data was the world's second-largest distributor of computer products behind Ingram Micro Inc. With SYNNEX Corporation, they made up the industry's "Big Three."
Azlan Group Limited (United Kingdom); TD Brasil, Ltda.;
Tech Data Canada Corporation; Tech Data Education, Inc.;
Tech Data Finance, SPV, Inc.; Tech Data Deutschland GmbH;
Tech Data Europe GmbH; Tech Data Latin America, Inc.
Ingram Micro Inc.; SYNNEX Corporation.
Campbell, Scott, "Steve Raymund," Computer Reseller News , November 10, 1999.
Doyle, T.C., and John Longwell, "Tech Data to Expand Reach via Software-Signing Spree," Computer Reseller News , February 14, 1994.
Dubashi, Jagannath, "Tech Data: There's Gold in Them VAR Hills,"
Financial World, May 12, 1992, p. 14. Finegan, Jay, "Turning Point," Inc. , April 1989, pp. 106–07.
"Inside Tech Data," Tampa Tribune , June 28, 1993.
Quickel, Stephen W., "Tech Data Muscles onto Others' Turf," Electronic Business Buyer , September 1993, p. 32.
Rooney, Paul A., "Tech Data Mastering Growth," Tampa Bay Business Journal , April 12, 1991, p. 1.
Scholl, Jaye, "Cool Cat with a Hot Hand," Barron's , Januray 6, 1992,p. 16.
—Robert R. Jacobson —update: Frederick C. Ingram