TD Synnex Pricing Spine-o-meter: 1 of 5 Vertebrae

TD SYNNEX, a global distributor of technology products from original equipment manufacturers, as well as supplier of technology to resellers, system integrators, and retailers, had an ok Q3 2022. Revenue was up a mild 0.6% but operating margin was down 9 basis points from Q2 2022. Comparisons to same quarter last year are difficult since TD Synnex only existed after the merger between Tech Data merged with Synnex was completed 1 September 2021. 

At their earnings call held on 27 September 2022, the priorities and focus of management were clearly stated. 

CEO Richard Hume touted of TD Synnex (1) achieving $140 million in cost savings through synergies which included a reduction in the number of ERP systems required to run the combined company, (2) serving 150,000 customers, a majority of which were small and medium sized IT resellers, and (3) of being named Hewlett Packard Enterprise Global Distributor of the Year for 2022 and the Microsoft Worldwide Partner of the Year for 2022. All fine accomplishments but cost savings rarely lead to revenue growth.

When asked about pricing, CEO Richard Hume was equally clear. He was clear that he lacks concern. He mentioned that currently, prices are stable or slightly increasing but the future may yield price decreases. This was of little concern to him since he foresaw the margin profile of TD Synnex remaining stable. 

Elsewhere in the financial reports, TD Synnex stated “Our business is characterized by low gross profit as a percentage of revenue, or gross margin, and low income from operations as a percentage of revenue, or operating margin. The market for IT products is generally characterized by declining unit prices and short product life cycles. We set our sales price based on the market supply and demand characteristics for each particular product or bundle of products we distribute and services we provide.” 

In other words, TD Synnex sees itself as a distributor that makes its profits from reselling at prices outside of its control. As such, management is focused on managing costs and is proud that (1) more than 90% of its costs are related to COGS and (2) its cash conversion cycle days are positive.

Other research reinforces the above understanding of the low priority of price management at TD Synnex today. We found little evidence of a strong strategic pricing team. We found evidence that Vistex, a price management software solution, is, or is being, implemented in TD Synnex Europe’s offices but are unsure of how it is used. (For example: Is it a CPQ solution or a pricing analytics and management tool for them?)

We should mention that completing a successful merger not much more than a year old and driving significant synergies in year one alone is a significant accomplishment. Combining disparate organizations, procedures, and cultures is more than a twelve-month effort. Given its stage of corporate development, it is not surprising that price management is not at the top of CEO Richard Hume’s priority list today. 

Yet most B2B distributors in other industries are far from nonchalant about price management. There is a high contrast between the statements made by TD Synnex on price management with the actions and priority taken to manage prices at other B2B distributors like Grainger, Sysco, and Quill. 

Given the attention given to price management at TD Synnex as indicated in their financial reports, management comments, and our understanding of their pricing capability development as of Q3 2022, we have come to the following measurement.

TD Synnex Pricing Spine-o-meter: 1 out of 5 vertebrae.                             

SNX (TD Synnex Corp.) rose from 84 on the day prior to their earnings call to 104 one month later. 12 month revenue ending 31 August 2021 of $62 B with a 1.6% EBIT margin and P/E ratio near 18.

Contact Wiglaf Pricing for your Pricing Spine-o-meter(TM) benchmark report and discover where your pricing practices can be improved.