CDW Slumping Stock Skyrockets Nearly 30 Percent Because of 4Q Profits
The direct marketer of computer hardware and software fell to a 52-week low of $22.25 on Dec. 20 after reaching a 52-week high of $86.12 two months earlier. The stock closed above $38 on Jan. 29, up about 40 percent from its Jan. 2 closing price of $26.81.
Net sales during the fourth quarter of 2000 totaled approximately $1 billion, an increase of 36 percent from the $741.3 million recorded during the same period in the previous year. Direct online sales reached $125 million during the fourth quarter, a 132 percent increase over the same period during the prior year.
"Once the economy picks up, CDW will grow multiples to the industry growth rate," said David Manthey, senior analyst at Robert W. Baird & Co., Milwaukee.
He added that the company's major competitors include Dell Computer Corp., Gateway, Insight Enterprises and PC Connection.
"CDW's model is better than a PC company [such as Dell and Gateway] selling direct because it can recommend best in breed from the different brands it markets," he said.
Manthey attributed the company's rapid stock drop to the broader economic slowdown. "Companies are spending less on IT products," he said.
CDW markets IT products such as computer software and hardware, printers and telephony systems from IBM, Compaq, Cisco Systems, Microsoft and Hewlett-Packard. The company provides products for small and mid-sized businesses, government entities and education centers. It targets a mix of direct mail, e-mail and catalogs to IT managers and buyers. The company markets its products to existing customers through telephone-based customer service and CDW@work, a Web-based purchasing solution for small businesses.
"As CDW customers purchase more online, productivity of account reps is improved," Manthey said.
He added that while CDW's online sales have escalated, the company does not push customers to buy online. It simply offers it as a quicker alternative.
In late September last year, the company launched a "magalog" for existing customers and prospects. The magalog, which is distributed nine times each year, features articles about IT products and technology as well as products the company is marketing.
"When you have the chairman of Compaq or Hewlett-Packard on the cover of a magalog, the relationship with your partners is emphasized to the customers," said Joseph Kremer, vice president of marketing at CDW Computer Centers Inc., Vernon Hills, IL.
Kremer said the company plans to run TV and print ads in conjunction with its vendor partners to emphasize the affiliation with the large name-brand companies.
To further generate customer awareness about the company's vendor partners, CDW initiated technology seminars early last year hosted by CDW employees as well as representatives from vendor partners.
In other company news, John Edwardson was named president/CEO on Jan. 29, replacing Michael Krasny, who will remain on the board and eventually will become chairman emeritus. Edwardson formerly served as chairman and president/CEO of Burns International Services Corp., Chicago, a provider of commercial security services.