National Solution Providers' Q1 PC Sales Up On Windows XP Expiration

The death of Windows XP support is breathing new life into the PC sales of many top solution providers.

National solution providers CDW, PC Connection and PCM all reported substantial increases in their notebook and desktop PC sales for the first quarter this year, thanks to the end of support for Windows XP and upgrades of older client devices.

CDW, for example, reported last week $2.65 billion in sales, a 10 percent year-over-year increase. The company said hardware sales grew 13 percent year-over-year, driven largely by desktops, notebooks and mobile devices; CDW CEO Tom Richards said during the earnings call that all three areas grew "well into the double digits" for the quarter.

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"Clearly, a driver of this growth was the expiration of the [Windows] XP operating system support," Richards said, "but we also saw pent-up demand unleashed as customers focused on replacing an aging install base of client devices."

The PC sales increase was across the spectrum, according to CDW, from government and education to small and midsize businesses. Richards said he expected the trend to continue. "We do expect there to be continued uplift from the refresh and the expiration of Windows XP. We still have customers that are in the process of refreshing their client devices," he said. "I don't know that it will keep the same intensity that it had in the first quarter, but I do believe that it will continue to be a growth driver for the remainder of the year."

PC Connection, meanwhile, also reported a 10.8 percent increase in sales to $559 million for its first quarter, largely attributed to Windows XP's expiration. The company said it saw double-digit sales growth in both notebooks and desktops during the period. Tim McGrath, CEO of PC Connection, said during the earnings call that the Windows XP uptick will continue through the year but that he doesn't anticipate it being as strong as the first quarter's boost.

"There could be additional Windows XP activity for the next couple of quarters, but it is not expected to be at the Q1 levels," McGrath said.

That might not be a bad thing for companies like PC Connection, which reported decreased gross margins as a result of higher sales for both PCs and low-priced Chromebooks. "There is almost a direct relationship; the more you have in those categories, the lower our overall gross margin is going to be," McGrath said. "As the Windows XP thing flushes out, you're going to see hopefully our margins kick back up again."

PCM (formerly PC Mall) also reported a strong boost for its business behind the Windows XP support expiration. While overall revenue for the first quarter grew just 1 percent to $339 million, notebook and desktop revenue grew 11 percent and 14 percent, respectively.

Meanwhile, PCM's tablet sales fell 12 percent, which coincides with a recent IDC report that showed tablet shipments falling this year. PC Connection and CDW did not break out tablet sales in their first-quarter earnings calls.

PCM executives didn't mention the Windows XP support expiration during the earnings call, but the solution provider has been a vocal champion of the Windows XP upgrade movement this year. Last month, PCM released a "Windows XP Funeral" spoof video that urged clients to move on from the OS.

PCM Chairman and CEO Frank Khulusi did say on the earnings call that the improving economic conditions would continue to boost business as the year progresses.

"We remain optimistic that the IT environment will at a minimum remain stable," Khulusi said, "and we're looking forward to more healthy growth as unemployment continues to decline and companies feel better about investing in IT solutions that can provide them with competitive advantages rather than simply saving them money in the short term."

PUBLISHED MAY 14, 2014