IT Distribution By the Numbers

1
IT Distribution By the Numbers

• TIM CURRAN
• Chief Executive OfficerGlobal Technology
  Distribution Council

2
Sales Growth

• 2004 and 2005 distributors outpaced vendors
• 2006 vendors grew at a slightly higher rate
• More exposure to faster-growing emerging/consumer
  electronics markets
• More growth via acquisitions compared to
  distributors

3
Distributor Gross Margins

• Relatively constant at 8 during past five years

4
Distributor SGA as of Sales

• Improving productivity and increasing efficiency
• From 7.0 in 2002 to 5.8 in 2006

5
Distributor Operating Margins

• Increased to 2.2 in 2006, from 1.2 in 2002
• Stable gross margins and productivity gains
  driving improvement

6
Operating Income Growth

• Distributors performing at rates equal to or
  better than vendors in each of the past four
  years

7
Working Capital Velocity

• Distributors have continually improved working
  capital turns for five consecutive years
• Reached 10.3x in 2006, up from 8.4x in 2002

8
Distributor Net Margins

• Productivity and working capital improvements
  over the past five years have resulted in net
  margins of 1.2 in 2006, up from 0.4 in 2002

9
Net Income Growth

• Net margin improvement helped increase
  distributor net income 31
• Vendor net income grew at a much slower rate ? 9
  in 2006

10
Distributor ROWC and ROIC

• With higher operating margins and better balance
  sheet management, distributor ROWC and ROIC have
  continued to improve
• Exceeded the average cost of capital of
  approximately 10 over the past three years

11
More Vendors Utilizing Distribution

• Over the past five years, the number of vendors
  utilizing the distribution channel increased from
  661 in 2002 to 781 in 2006

12
Direct Not a Religion
13
Valuation Ratios
All valuations as of April 2, 2007

• Despite becoming increasingly important in the
  channel and generating superior financial
  performance across most measures, distributors
  continue to trade with significantly lower
  relative valuations

14
Relative Stock Performance

• Until recently, distributor and vendor stocks
  performed comparably

15
The Takeaways

• Valuations appear incongruous with results
• Distribution industry delivering strong overall
  performance
• Outpacing vendors in many key financial areas
• Growing number of vendors leveraging
  distribution
• SMB market a distributor sweet spot remains
  robust

16
The Takeaways

• IT Distribution
• A Compelling Investment Opportunity