CDW CEO: Windows Server 2003 Opportunity Just 'A Mild Breeze'

CDW CEO Thomas Richards downplayed the significance of the opportunity surrounding Windows Server 2003 during the company earnings call on Monday morning, saying "it hasn't been such a big driver" of business.

Despite the lack of opportunity Richards said CDW saw around Server 2003 end of support, the $12 billion solution provider saw double-digit growth in its server business, and an 8 percent growth in its hardware segment.

"The impact of Win Server 2003 is kind of a mild breeze at our back so to speak," Richards said during the Q&A portion of the call.

[Related: CDW Net Income Up 25 Percent in Q2; Completes Acquisition Of U.K.-Based Solution Provider]

"A lot of the customers had really started preparing for the Win Server 2003 expiration late last year. It has carried into this year, but I also think there's what I would call a natural refresh going on," he said. "You have great new technologies like converged infrastructure, which is driving some of the behavior in the marketplace. So I would say that I don't know we're in any particular inning. And since it hasn't been such a big driver, I don't know that we are thinking about some drop-off as far as its impact on the marketplace."

Server 2003 is mostly used by smaller businesses to date, which makes up just 15 percent of CDW's customer base by revenue.

Richards said that in the server business, and with hardware in general, enterprise customers buy products in correlation with their refresh cycles. He added that the same holds true for Windows 10, as he does not view the wait for the new OS as negatively impacting CDW's PC business.

Multiple research firms have illustrated the PC market, both globally and in the U.S., has dipped quite a bit in the second quarter of 2015 ahead of the Windows 10 launch. Research firm IDC recently reported that the worldwide PC market saw an 11.8 percent decline in shipments due to vendors raising prices in reaction to weaker exchange rates, in addition to retailers cutting back on inventory in preparation for the launch of the OS.

In the U.S., where CDW conducts roughly 90 percent of its business, IDC said the market saw a 3.3 percent decline, however, Richards said the decline from Windows 10 may be relevant to consumers, but is not related to enterprise customers.

"I think customers, typically in the enterprise space, take a little bit of a wait-and-see attitude ... 'Wait 'till the first patch comes out. Let's see how it works,'" Richards said on the call. "I think there is a fair amount of excitement about the product. I think there has been lots of stuff written about the fact that it may not drive hardware sales, but what I would say for us, if you look at our PC sales all the way back to 2013, there has been this constant drumbeat of growth, even before the Windows XP accelerant. I think that's because the businesses stay on a normal cycle of investing in PCs for the purpose of productivity."

As it relates to its PC business, Richards emphasized that CDW anticipates "steady growth, with or without Windows 10."

PUBLISHED AUG. 4, 2015