CDW: We're Confident We Can Continue Strong Growth Trajectory After 'Terrific' 2014

CDW has seen a strong growth trajectory over the past year, and it isn't close to over yet, CFO and Senior Vice President Ann Ziegler said.

Over the past year, industry bellwether CDW has posted strong quarterly earnings. In the first quarter, sales were up 10 percent to $2.6 billion and earnings were up 80 percent to $50 million. In the second quarter, CDW continued its growth with $3.1 billion in sales, up 11.8 percent over the prior year, and earnings of $86.6 million, up 85.5 percent. In its most recent report, CDW reported a 14 percent year-over-year growth in sales to $3.2 billion, with earnings of $55.6 million, up from a loss of $2.2 million in the same quarter last year.

While some investors fear that the strong 2014 growth driven by factors such as a PC refresh and an education push might dwindle in the coming year, Ziegler said that she is confident that the growth won't slow anytime soon.

[Related: CDW Acquires Stake In $850M IT Firm, Posts Q3 Gains]

Ziegler said that the company will officially comment on the 2015 outlook in its upcoming fourth-quarter earnings call, but that CDW will be sticking with its medium-term targets and looks to exceed market growth by 2 to 3 percentage points.

That continued growth is evidenced in a blossoming business that continues to take market share from its competitors, said Ziegler at the Raymond James Systems, Semiconductors, Software and Supply Chain Conference in New York this week.

Technology is booming, Ziegler said, with an estimated $650 billion market, and an estimated $200 billion addressable market for CDW. The solution provider, which is No. 8 on the CRN SP500 list, holds about 5 percent market share, she said.

A highly fragmented market, held primarily by smaller or regional VARs, leaves a huge opportunity for CDW to continue to gain market share, she said, and the solution provider has been able to "consistently gain market share over time." The reason CDW has been able to do that is its strategic position between vendors and customers, Ziegler said. As change in technology accelerates, CDW is able to act as a "trusted adviser" to customers and a feedback loop between vendors and end users.

"We get asked all the time about change. We view change in IT as a good thing for us. It’s a good thing for us because it drives complexity, which makes customers look for a trusted adviser to navigate that complexity," Ziegler said.

Ziegler outlined for investors at the event some of the key factors that she believes make CDW's competitive advantage sustainable, including scale and scope, a performance-driven culture, highly skilled sales and services capabilities, a national footprint and experienced management. Breaking some of those components down, Ziegler said that factors, such as a profit-based compensation model for all levels of employees and an incredibly broad range of technology offerings, help keep CDW "nimble" as the industry evolves at breakneck speed.

For example, Ziegler highlighted CDW's success in the education market, noting that CDW recognized early on the importance of the changes coming to K-12 from new Common Core rules. The solution provider started investing more than 30 months ago in building solutions with its vendor partners to get ahead of the market and gain "first mover advantage."

"We're able to move resources where the growth is coming in the market and continue to deliver balanced performance on a consolidated basis," she said.

Ziegler said that she expects that growth to continue as slower-moving schools begin to adapt to Common Core requirements.

CDW also is expanding its business in new markets for the solution provider. A November acquisition of $850 million United Kingdom-based IT firm Kelway broke international ground for the company. Ziegler said that the move was "strategic" for the company, both opening it up to new customers and helping better service U.S.-based customers with international offices.

CDW also is focused on growing its professional and managed services business, which currently accounts for about 3 percent of the overall business, Ziegler said.

PUBLISHED DEC. 9, 2014