We recently interviewed David Dicker, Chairman and CEO of Dicker Data Limited (ASX: DDR). Based in Australia, Dicker Data engages in the wholesale distribution of computer hardware, software, and related products in Australia and New Zealand. Mr. Dicker co-founded the company in 1978. We appreciate the time taken by him to answer our questions and would like to thank him for sharing his thoughts.
Simply Wall St: Congratulations on crossing $1B in revenues in first-half 2020. This is the first time the company reached the $1B goal in only 6 months. When did you originally expect to reach that goal before the COVID-19 tailwind took over?
David Dicker: We actually forecast, internally, on a 12 month basis, so the H1 intermediary number really isn’t part of our internal benchmark. We were looking for $2B for this financial year and we use a calendar FY. We will know if we make our internal benchmark for calendar FY and will be releasing our full year results around February 21st, 2020 That’s our real goal. The $1B H1 was really just incidental.
SWS: In your last annual report, it was reported that emerging technologies including IOT (Internet of things), AI (artificial intelligence), and machine learning will become more mainstream in 2020. How are you positioning the business to meet these needs and when do you expect to see a measurable impact on your business? You also mention that you have made early investments into these technologies and are already a leader in this space. What makes you say that?
DD: Our role is to identify areas we think will have a good future and then try and engage with vendors in that area. Nobody can reliably predict the future, so we don’t even try that. What we try to do is be agile and flexible so that we can be responsive to market trends and demands.
SWS: As a follow-up to that, will the focus be more on software in the future? Your impressive first half results were mostly driven by software sales (up 44% on last year vs only a 11% increase in hardware sales). Currently, 25% of total revenue is from software sales and the rest is coming from hardware. Do you expect this to change?
DD: As I say above, we go with the market and customers. Whether it changes or not, doesn’t really affect us. We adjust to the change and try to optimise the outcome. We are not in the business of setting trends. We serve trends. But there will always be a very large market for hardware. You need that to run the software.
SWS: In a world where software is in the cloud, and is increasingly being designed to be accessible and easy to buy, activate, and use, is there a place in the market for a software reseller? Why would a customer buy through a reseller instead of buying direct from the vendor on the internet?
DD: This is one of the oldest misconceptions in the computer industry. This is how a Channel Model works: a vendor will have literally thousands of dealers who are able to access their product, via distribution. All those dealers are looking for sales, for their benefit and that also benefits the vendor. All that work, to sell the vendors product, is done for free by dealers. It’s done at no cost to the vendor. So you have this army of people working on a vendor’s behalf who you only have to ‘pay’ when they make a sale. This is a very low cost selling model.
Contrast this to a direct Vendor Model. Now the vendor has to find a way to reach the customers directly. Do they hire an army of sales people? For a small haircut, the vendor has a huge market coverage. The direct model can only work with high end luxury goods and even then it will only work if the volumes are very low. Even Ferrari have a large dealer network.
SWS: You seem to be running a really tight ship with LTM (last twelve month) net margin as low as 3%. However, they still seem higher than the net margins reported by SYNNEX and Ingram Micro-your two biggest competitors in Australia. What do you think that you get right as a business that they don’t?
DD: They think we use an accounting trick to show those margins. Which of course is not true. We are a public company and even before that we ran a fully transparent system. For competitive reasons, I won’t give details. Suffice to say that it has something to do with company culture.
SWS: Finally, unrelated to Dicker Data, what made you build your enterprise Rodin Cars? Would you describe it as a hobby, an obsession, or another business venture?
DD: It’s absolutely NOT a hobby. I’ve never really been interested in hobbies. It’s a business venture that I have the same obsession to succeed with as I did with Dicker Data. The reason for doing it is because I have always wanted to build my own cars and I finally got into a position where I could fund it. Life is short and you want to do what you can, while you still can. We will have some very exciting product announcements in early 2021.
SWS: Thank you for your time, it was great to hear your thoughts about your industry & work, and we’re sure our readers will appreciate it, too.
Our team here at SWS had a great time putting together these questions. Readers who would like to know more about the company can visit ASX: DDR.
P.S: If you are an executive or company representative and would like to organise an interview similar to this one, please contact us at firstname.lastname@example.org.
Our interview was conducted via email on December 17, 2020. Minor grammatical corrections have been made to the text. Simply Wall St was not compensated for the production of this interview. Company representatives are responsible for the answers provided to our questions.
Neither Simply Wall St analyst Kshitija Bhandaru nor Simply Wall st hold any position in any of the companies mentioned.This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation.
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