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The importance of Tech Data's relationship with Apple

Apple is the distributor's biggest vendor partner, which got Billy Macinnes wondering why that will come as a surprise to so many of us

I must say that it came as something of a surprise to me to find out that Tech Data’s biggest vendor partner is Apple. I expect it will surprise quite a few other people too but there it is, in black and white, in a filing to the Securities & Exchange Commission on 29 November last year. The filing reveals that Apple accounted for 14% of the distributor’s consolidated net sales for the nine months ending 31 October 2017, down from 18% in 2016. HP Inc contributed 10% – and so did Cisco.

Based on net sales of $25.68bn, that means Apple sales contributed just over $3.59bn to the distributor’s coffers. And despite the reduction as a percentage in 2017, the amount of money generated by Apple sales actually increased by 6% from $3.38bn in 2016. The reason for the overall fall in the net sales contribution percentage is because of a 37% increase in Tech Data’s turnover due to the inclusion of the Avnet Technology Solutions business it acquired earlier in 2017.

I suppose the surprise derives mainly from the fact that the general perception of Tech Data is that it is more of a distributor of vendors like HP Inc and Cisco products than it is of a company like Apple. This is probably due to the belief that most distributors are most likely to be dealing with resellers dealing with the SME and corporate markets where, typically, the likes of HP Inc and Cisco are to be found.

Vendors like Cisco and HP Inc are very heavily engaged with the business market, although HP has always had a big presence in the consumer printer market, and they have a tradition there. Apple, by contrast, has always been viewed as a minority player in the business sector with a much larger presence in the consumer space. It has dabbled in the commercial space before but Apple has never been as focused on it as many other vendors.

The iPhone has helped create a significant space for Apple in the business market and established a beachhead for other products, including computers. According to one analyst <https://www.benzinga.com/analyst-ratings/analyst-color/17/10/10167862/investors-arent-fully-appreciating-dynamics-of-tech-dat>, the iPhone accounts for about a third of all Tech Data’s Apple revenue. That’s pretty impressive but it also means that two-thirds of the Apple revenue (or $2.4bn) comes from other products. That’s not small beer.

The intriguing thing is that Apple’s initiatives around the corporate market (including partnerships with the likes of IBM and Cisco) are still in the relatively early stages, so you could expect Tech Data to benefit even more once those and other initiatives start to kick in.

As an aside, it’s worth noting that in the most recent conference call with analysts for the distributor’s Q4 2018 results, the name Apple or its associated technologies didn’t come up once. Maybe that’s why the amount of business Tech Data does with Apple still seems so surprising.

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