GTDC Chief: PC, Tablet Sales Woes Made For Challenging 2015 Start For Distributors

Distributors had a "miserable" start to 2015 as PC and tablet sales fell off the map and networking failed to replicate the success of late 2014, the head of the Global Technology Distribution Council said Thursday.

"In 2015, we got off to a really slow start," said Tim Curran, chair of GTDC. "Miserable Q1 growth, a little bit better, but still not where it needs to be in Q2."

After delivering year-over-year sales growth of above 5.5 percent in all four quarters of 2014, distributors saw their annual U.S. hardware and software sales grow by just 2.9 percent in the first quarter of 2015 and 4.2 percent in the second quarter, according to NPD Group data presented by Curran on Thursday during the 2015 GTDC Summit in San Francisco.

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This has also been reflected in earnings results from the six publicly traded distributors based in North America: Avnet, Arrow Electronics, Ingram Micro, ScanSource, Synnex and Tech Data.

Only ScanSource and Synnex posted global sales growth of more than 2.5 percent in the first quarter of the year, while just ScanSource -- which completed two major acquisitions in late 2014 -- saw global revenue climb by more than 3 percent in the second quarter of 2015 on a year-over-year basis.

Conversely, Tech Data has posted global sales drops of 12 percent and 4 percent in the first two quarters of this year, respectively, while Arrow, Ingram Micro and Synnex all saw year-over-year revenue decline in one of the first two quarters of 2015.

Nowhere has the downturn been more pronounced than in computers, which Curran said "dropped off the map." PCs experienced sharp declines in year-over-year sales from March to May of this year after enjoying 14 consecutive months of impressive revenue growth, with net desktop sales declining and net notebook sales growing, but at a much lower rate, according to Curran.

This could be a hangover from the Windows XP refresh frenzy in early and mid-2014, Curran said, as well as the result of end users' holding off on PC purchases until the release of Windows 10 in late July of this year. Year-over-year computer sales have held relatively flat from early June to mid-August, according to NPD data.

Similarly, year-over-year tablet sales really fell off from December 2014 to April 2015, after already holding flat in October and November of last year. Tablet sales have held virtually flat since May, the NPD Group found.

"You can see the massive falloff, but not all product categories were affected equally," Curran said.

Networking and storage distribution sales in the U.S. grew modestly throughout 2015 despite the IT market's going very soft in February and March, Curran said.

Networking, though, failed to deliver the high levels of year-over-year growth posted from August to December of 2014, according to NPD Group data, while storage growth slowed considerably between April and the present after impressive gains from November 2014 to March 2015.

"Most categories are growing, but the demand character of the industry is shifting," Curran said.

Direct market resellers, national integrators and retail outlets have really taken the brunt of the hit, with gains diminishing in late 2014 and early 2015 before seeing an overall drop in sales from February to May of 2015, the NPD Group found. Sales from distributors to these partner communities have been relatively flat since June on a year-over-year basis.

After posting modest sales gains throughout 2014 and into early 2015, large solution providers have essentially been treading water since March.

One type of partner, however, has been essentially immune to the sales downturn: small solution providers. These bread-and-butter VARs posted more modest gains from February to May of this year, but have returned since June to the more robust growth levels they experienced during all of 2014.

"The market has slowed down, but the core target for distributors -- small solution providers -- continue to grow," Curran said. "VARs are still thriving and driving."

PUBLISHED SEPT. 10, 2015