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Windows Server 2003 Refresh a 'Mild Tailwind' for CDW

CDW Corp. in its earnings call Tuesday provided a look at how the Windows Server 2003 refresh cycle is playing out for one of Microsoft's largest partners.

Microsoft is cutting off support for Windows Server 2003 on July 14, and many Microsoft partners are focused on the server refresh business, including CDW, which spun up a Windows 2003 migration practice in the middle of 2014.

Tom Richards, chairman and CEO of CDW, said Windows Server 2003 refreshes accounted for a small part of what he characterized as high single-digit growth in server sales for CDW in the fourth quarter of 2014.

"The other thing that we're hearing is the many customers either through virtualization have created capacity and so [they're] not necessarily automatically adding new servers, but maybe expanding the capacity of existing servers, in addition to looking at cloud-based solutions, which, as turned out great for us, it's one of the reasons our cloud business has had such exceptional growth," Richards said, according to a Seeking Alpha transcript of the call.

"I hesitate to use the word tailwind, because of what a big tailwind XP was, but I think it will be a mild tailwind from -- for 2015," Richards said.

The XP tailwind referred to the Windows XP end of support in 2014, which fueled CDW growth well throughout the year and later than he expected, Richards said.

"My expectation for 2015 is we'll return to what I would describe as a more normal rhythm that we have had in previous years," Richards said of client-side demand.

CDW's fourth quarter results included adjusted earnings of 59 cents per share, which was 5 cents ahead of analysts' estimates, and revenue growth of 12.4 percent to $3.05 billion. The company also declared a dividend of 6.75 cents a share to be paid on March 10.

Posted by Scott Bekker on February 11, 2015 at 10:48 AM


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