Commercial Technology Industry Analyst
Whether corporate earnings or NPD’s distributor tracking numbers, quarterly results are always met with great anticipation. In my opinion, second-quarter results get the least amount of love, not because April through June boasts the lowest amount of revenue (actually, it’s often pretty similar to the third quarter), but rather because summer vacations are starting and people tend to be out of the office more. This year, according to NPD Distributor Track, the second and third quarters were of nearly equal importance, in terms of revenue generated in the technology distribution arena.
The Canadian market has been posting positive growth over the past 10 quarters, with the second quarter of 2019 ending with 7 percent year-over-year revenue growth. This continuous growth is more impressive, when we compare recent second quarter results this year against the second quarter in 2016, as the market has grown by a whopping 24 percent.
While software revenue was only 18 percent of total revenue, it grew twice as fast as hardware did. The areas of database and application development (e.g., IBM Cognos and MS SQL Server), business applications (e.g., MS office, Autocad, and Autodesk), and security all grew by double digits, year over year.
PCs have been a key contributor to hardware growth, adding nearly one-third of revenue from all hardware categories. While sales revenue from both notebooks and desktops grew 9 percent, the build-to-order (BTO) segment grew fastest. Mind you, BTO notebooks make up approximately one-third of total notebooks, rising to almost half of all desktop models. The growth in BTOs gives a boost to other related categories, like warranties, monitors, hard drives, solid-state drives, processors, and accessories. All of these categories have also experienced positive growth.
Growth in commercial devices leads to additional spending on infrastructure-type categories. Revenue from servers grew by single digits, as did communication devices and storage arrays. However, the most impressive growth happened in all-flash arrays, storage area networks, and hyper-converged systems. In short, there is more investment happening in new setups and in upgrading existing structures. Small and large value-added resellers (VARs) are driving those numbers upward, since together they comprise 62 percent of total revenue.
The momentum in technology distribution is very positive, even though it was thought the second quarter of the year might be slower and that sluggishness was expected to continue through the end of the year. However, these cheery second-quarter numbers make me slightly more confident that we shall see healthy growth, through the second half of the year.