For most of the business-to-business merchants and computer products marketers tracked by Multichannel Merchant, the third quarter reflected robust revenue and income gains. All but four of the companies saw year-over-year sales increases, while every marketer except two received a boost in their bottom lines. What’s more, all 12 of the companies ended the quarter in the black.
The computer products marketers had an especially strong quarter. All six companies registered bottom-line increases, including whopping gains of 733% and 128%, respectively, for PC Mall and PC Connection. “While margins are still slim, percent increases look huge, due to the low basis for comparison,” notes Stuart Rose, managing director for Wellesley Hills, MA-based Tully & Holland, which tracks the publicly traded companies for Multichannel Merchant. “Nonetheless, all the computer companies saw positive earnings growth.”
For the most part the income gains were not driven by sales, Rose says, but by improvements in margin and operations. Even so, several companies posted double-digit top-line increases. Lawrence, PA-based networking products and services provider Black Box Corp. logged the largest revenue increase, percentage-wise, at 47%, as its sales reached $271.3 million for the quarter.
Despite sales slide, Tessco grows income
Quarter ended: Sept. 24 The facts: Hunt Valley, MD-based Tessco Technologies, a provider of wireless communications products and services, took a 14% hit on the revenue side, with sales falling to $118.6 million from $137.6 million. But income nonetheless rose 9%, to nearly $1.9 million. The revenue drop resulted from a 97% decrease in consumer sales, due to the end of Tessco’s affinity relationship with T-Mobile USA. In September 2005, T-Mobile USA transitioned away from a Tessco-provided e-commerce marketing and sales system to an inhouse Web solution and an alternative third-party logistics provider. On the bright side, core revenue from Tessco’s commercial and government markets grew 48% year over year. The skinny: Sources say Tessco has made several confident moves with its stock, including a stock dividend and buyback program.
Big gains for PC Connection
Quarter ended: Sept. 30 The facts: Third-quarter revenue for Merrimack, NH-based PC Connection rose 12%, to $415.2 million from $371.1 million last year. Net income soared 128%, to $4.4 million from $1.9 million last year. Because computer resellers such as PC Connection operate on “razor-thin margins,” Rose says, even small margin gains translate into large percentage gains. “Those businesses are fundamentally not that profitable as currently developed,” he says. The skinny: Net sales to large-account customers grew 41%, to $113.7 million, due in part to PC Connection’s October 2005 acquisition of Amherst Technologies, a Manchester, NH-based IT solutions provider that targets midsize and large companies.
PC Mall computes surge in net income
Quarter ended: Sept. 30 The facts: Torrance, CA-based reseller PC Mall saw its third-quarter sales slip 1%, to $242.2 million. But that’s because last year’s third-quarter sales included $10.6 million in revenue from online discounter eCost.com, which the company spun off last year. Excluding that revenue from last year’s third-quarter figures, PC Mall’s sales actually increased 4%. More impressive is PC Mall’s 733% rise in net income, to $1.9 million from $229,000 a year ago. The skinny: PC Mall is anticipating revenue growth in 2007 as sales of Microsoft’s Vista-based computers take hold. The company (along with other computer resellers) expects to see more businesses replace aging Windows XP operating systems.
|Company||3Q REVENUE||3Q NET INCOME (LOSS)|
|12 months prior||Current quarter||Increase (decrease)||12 months prior||Current quarter||Increase (decrease)|
|Black Box Corp.||$185,050||$271,325||47%||$12,797||$13,079||2%|
|CDW Computer Centers||1,670,204||1,739,457||4%||73,124||77,734||6%|
|Sport Supply Group||23,200||24,000||3%||621||1,700||174%|
|Notes: NM = not meaningful Source: Tully & Holland|