Tech Data CEO Sees Tablet Computer Market Momentum Growing

Tech Data CEO Bob Dutkowsky Monday said tablet computers, led by Apple's iPad, is now one of the fastest growing product lines on the distributor's manufacturer line card.

"We can sell every tablet that we can get right now," said Dutkowsky in an interview with CRN after the Clearwater, Fla.-based Tech Data announced first-quarter earnings."The primary beneficiary of the momentum around tablets today is Apple."

Five years ago, Apple was not even on Tech Data's top 10 vendor list, but today, boosted in part by the Apple iPad, it is one of the distributor's top five vendors, said Dutkowsky. "It has grown dramatically," said Dutkowsky of the Apple business. "Think about the breadth of the Apple product line over those five years. Five years ago they had a desktop and a laptop. Now think about what they have and the mindshare they have on top of that."

The change is in line with Apple's transformation from a computer company known as Apple Computer to a consumer electronics company simply known as Apple, said Dutkowsky. That consumer electronics strategy is "perfectly aligned" with Tech Data's strategy, he said. In fact, he said, consumer electronics is one of the distributor's four key pillars along with mobility, software and data center.

The strong tablet computer showing came with Tech Data shares sliding $6.58, or 12 percent, to close at $46.99 in trading Monday after the company posted earnings below Wall Street expectations.

For its first fiscal quarter ended April 30, Tech Data posted earnings of $48.7 million, or $1.03 per share, on a 13 percent increase in sales to $6.33 billion. The Wall Street consensus was for earnings of $1.05 per share on sales of $6.4 billion, according to a survey of analysts by Thomson Reuters.

Dutkowsky said that the company's European business did not "fire on all cylinders" and pulled the overall performance of the company down. He said the Americas business performed "exceptionally," but the "European business got out of sync a little bit." Americas net income was $47.9 million, or 1.83 percent of net sales, compared with the year ago quarter. In contrast, European net income was $30.3 million or .88 percent of net sales. "The good news is we know exactly what we have to fix in Europe," added Dutkowsky. "It is isolated to a few areas in the company."

Tech Data's strong computer tablet showing comes as a new study commissioned by cloud computing and mobility solution provider Model Metrics showing that computer tablets will make a major splash in the enterprise in coming years, but many companies don't have a strategy to leverage them to their fullest value. The study was performed by Dimensional Research, a Sunnyvale, Calif. market researcher. According to Chicago-based Model Metrics' research, 78 percent of respondents plan to have tablet computers officially deployed by the end of 2013, but only 51 percent said they have an actual adoption strategy in place.

Dutkowsky expects a computer tablet channel blitz over the next several quarters, including the release of Research In Motion's Playbook, HP's WebOS-based TouchPad and a host of Android-based tablets in the second half of the year. "Today, there is really only one primary tablet [Apple iPad] we are selling," he said. "Next year at this time, we will be selling multiple tablets."

NEXT: How Big An Impact Is The Tablet Computer Having In The Business Market?

So, just how big an impact is the tablet computer having in the business market? Dutkowsky pointed to a recent restaurant visit where he was handed an Apple iPad that included the restaurant's menu and wine list with a hospitality application suggesting wine and food pairings. He said he and his wife ordered their meal and wine on the iPad application. "That is a purpose-built content device that is networked that changes the way you order in a restaurant and the concept of how you think in a restaurant," he said. "There is a whole new opportunity that was created by that content, purpose-built tablet."

Tech Data's aim is to sell solution providers all the pieces of that vertical hospitality solution from the computer tablet to networking gear and software licenses, said Dutkowsky.

The tablet computer has resulted in a shift in the mobility market with customers demanding a "content"-based tablet device alongside a computing device like a laptop or a netbook and a voice device like a smartphone or handheld phone, said Dutkowsky.

"People are going to want a computing device: call that a laptop," he said. "They are going to want a content device: call that a tablet. And they are going to want a voice device: call that a phone or a smartphone. The beauty of that is Tech Data sells all three of those."

"What we see is the tablet replacing the netbook," said Dutkowsky. "The netbook was designed to try to be a computing device that was really a content device."

"What the tablet has become is a great device to browse the Web and do email and watch movies and read books: content," he said. "And the computing device -- whether that is the laptop or the desktop -- remains an important platform. People that need to do computing, big spreadsheets, modeling, PowerPoint presentations, you still need a computer to do that."

Don't bury the netbook yet, said Dutkowsky. "We still have netbooks on the shelf and we still have demand for netbooks," he said. "Why does someone want a BlackBerry versus an iPhone? The primary reason is they want a keyboard. The netbook is a content device with a physical keyboard. For some people, that is a preferable platform. But I think clearly the momentum has swung toward the tablet, a lightweight, powerful content device that also has the ability to do input through a virtual keyboard. But its real intention is to deliver content to you."

Dutkowsky said that over time Tech Data's StreamOne software license selector will help VARs select the right application from the thousands of apps that are being brought to market to run on tablet computers and other mobile devices. "There are going to be applications available from places that no one even thinks about today," he said. "Somebody has to centralize that and make it all available. If you think about what an IT distributor does, we make a broad array of solutions available for our VARs. The apps side of this is going to be a really exciting opportunity for us."