PC Connection sees sales, income jump

Results aided by bounce-back in government sales

The expiration of support for the Windows XP operating system and demand for classroom computers has led to a flurry of sales of notebooks and Chromebooks at PC Connection, boosting the company’s first-quarter sales and net income.

The Merrimack-based provider of technology to businesses and institutions saw its net sales grow to almost $560 million, nearly 11 percent more than the first quarter last year. Net income increased almost 17 percent to more than $7 million, or 27 cents a diluted share, according to the company’s filing with the U.S. Securities and Exchange Commission.

Notebook and tablet sales increased 29 percent in the first quarter ending March 21 as businesses rushed out to buy replacements before April 8, the date Microsoft stopped servicing XP computers. That trend should continue for the next couple of quarters, but it is going to “tail off,” said CEO Tim McGrath in an earnings call.

That’s good and bad news for a company that has been transforming itself from a mail order catalog selling equipment, primarily to small businesses and individuals, to an information technology company that sells services to all businesses as well as the government sector.

PC Connection earns more money in consulting services then simply selling equipment and has invested in engineers to help businesses provide “solutions” to technological change, ranging from networking to cloud storage.

The company no longer markets to individuals.

Small and medium-sized business now only account for 45 percent of its sales, with the rest going to larger corporations (36 percent) and the public sector (19 percent.)

Business in the public sector, hit previously by the federal government shutdown and spending cuts, bounced back to $105 million, 26.4 percent more than the first quarter of 2013, with sales to state and local governments and educational institutions jumping nearly 29 percent. That’s primarily due strong trend in schools to buy a “computer for every kid in the school,” said McGrath in explaining the growth in Chromebook sales.

As a result of the boost in sales, the company had about $65 million in cash at the end of the quarter. McGrath said the company is looking over acquisition possibilities, particularly in the IT consulting sector, but so far hasn’t come across a deal that would make sense financially.

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