Crossing the Pond: PCM Set to Expand Into Europe To Better Serve Multinational Firms

PCM will launch a new United Kingdom and European practice Monday and has tapped the man who helped bring CDW into Europe to spearhead its operations.

The El Segundo, Calif.-based company, No. 28 on the CRN Solution Provider 500, said its expansion into Europe comes on the heels of its successful 2015 launch into Canada through the acquisitions of Acrodex and the Systemax's TigerDirect business. PCM said it expects its U.K. subsidiary to employ 90 people by the end of 2017.

"The [Canadian] strategy has played out exactly as we had anticipated … and we believe the U.K. expansion is a continuation of that approach," CEO Frank Khulusi told Wall Street analysts during an earnings call Thursday. "We're being methodical about our approach."

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Having a brick-and-mortar presence in Europe will raise PCM's image and credibility in the eyes of global customers, Khulusi said, as well as giving the company capabilities it didn't have previously. PCM also plans to pursue opportunities with customers based in the U.K. and across the European Union, Khulusi said.

PCM brought in Donavan Hutchinson on Feb. 1 to be its UK managing director, where he will be responsible for creating, developing and executing the company's European game plan. Hutchinson previously created, brokered and helped define strategy for the collaboration between CDW and U.K.-based Kelway, generating the foundation for CDW's full acquisition of the firm in August 2015.

"I am excited to bring my experience and track record of successfully growing global sales of IT solutions to the PCM family," Hutchinson said in a statement. "We have already built an incredible management team to lead the operation, and I'm confident we will be able to expand the successes of PCM to the U.K. and across Europe."

PCM could have also gotten into the U.K. by making an acquisition of significant size and cost, Khulusi said, but opted not to do so.

"We can get much better results with an exponentially lower price tag doing it organically, with perhaps some tuck-in acquisitions over time," Khulusi said.

The bulk of PCM's European expansion efforts will focus on the U.K., Khulusi said, since the regulatory environment, ease of transactions and level of the market is most similar to North America. But the company nonetheless has plans to drive sales outside of the U.K. into the rest of Europe, Khulusi said.

PCM said it spent a great deal of time during the first quarter setting up its European operation, Khulusi said, hiring a managing director and various other leadership roles to ensure the success of its international expansion. The company said it expects to spend $4 million launching its U.K. business in 2017, and expects the operation to be profitable by 2018.

The company said it is hiring for U.K.-based positions in sales, vendor management, purchasing, marketing, IT, finance and a variety of other business roles. PCM will face competition in Europe from direct market reseller powerhouses CDW and Insight Enterprises, as well as locally-based competition, Khulusi said.

PCM saw sales in the quarter ended March 31 climb to $524.4 million, up 5 percent from $498 million during the year-ago quarter. Analysts expected PCM to report revenue of just $520.3 million, so the company enjoyed an upside surprise.

The company reported net income of $4 million, or 30 cents per diluted share, crushing net income of just $156,000, or 1 cent per diluted share, last year. On a non-GAAP basis, net income jumped to $3.6 million, or 26 cents per diluted share, up 46 percent from $2.4 million, or 20 cents per diluted share, the year prior. That, too, handily beat analysts expectations of 14 cents per share.

PCM's stock plummeted $4.65 (15.42%) to $25.50 in after-hours trading Thursday. Even with the latest decline, PCM's stock price is up more than two-and-a-half fold since the start of 2016.

PCM saw sales in its commercial segment climb to $408.5 million, up 6 percent from $384.4 million last year due to investments in the company's advanced solutions business for both enterprise organizations as well as small and medium-sized businesses.

Public sector sales tumbled to $67.3 million, down 7 percent from $72.5 million the year prior due to a reduction in spending from a large customer in PCM's state, local government and education business. And Canada sales leapfrogged to $48.7 million, up 18 percent from $41.2 million last year due to the December 2016 acquisition of Microsoft Gold partner Stratiform and higher product and services sales.

PCM's strongest product categories included networking – where sales grew by 18 percent – and notebooks and tablets, where sales climbed by 10 percent. The company's top vendors are Microsoft, HP Inc., Apple, Dell, Cisco Systems, Lenovo and Hewlett Packard Enterprise, which collectively represented 60 percent of PCM's gross billed revenue in the quarter, said CFO Brandon LaVerne.

For the coming quarter, PCM expects adjusting earnings of between 44 and 49 cents per share on revenue of between $580 million to $600 million. Analysts from Thomson Reuters were projecting earnings of 53 cents per share on revenue of $604.8 million.