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Dicker Data shares lift on new distribution agreement

Dicker Data Limited (ASX: DDR) shares are up 2.82% today to $6.76 following the announcement that the company has been appointed as the Check Point (NASDAQ: CHKP) distributor in Australia. Under the distribution agreement, which is effective immediately, Dicker Data will add Check Point security products to their portfolio. 

A closer look at Dicker Data

Dicker Data is a technology hardware distributor that sells via a base of more than 5,000 resellers. Vendors distributed by Dick Data include Citrix, Intel, Lenovo, Microsoft, Cisco, and HP. Check Point provides software and combined software and hardware products for IT security, encompassing network, endpoint, cloud, mobile, and data security and security management. 

On the new partnership, Dicker Data Chairman and CEO David Dicker stated:

[I]n the past two years we’ve been focused on building a comprehensive security practice offering end-to-end security solutions for our reseller partners. As we launch our partnership with Check Point, we’re further cementing Dicker Data’s position as the security distribution destination for the Australian IT Channel.

Named the world’s leading Cisco distributor in 2019, the Dicker Data share price has seen a phenomenal rise over the year. Though still up 133% from $2.81 in January, Dicker Data shares have dropped back slightly from highs of over $8 in December. 

The technology company is a strong distributor to the mid-market and small and medium businesses, with approximately 80% of revenue coming from these sources, according to COO Vladimir Mitnovetski. Revenue increased 17.9% year-on-year (YoY) to $1,289.1 million in the September quarter. 

Operating profit before tax was up 38.6% to $47.4 million for the September 2019 quarter from $34.2 million for the September 2018 quarter. Full year operating profit before tax is expected to finalise at over $60 million for FY19.

Just under 80% of Dicker Data revenues in the 2019 half year were derived from hardware and virtual services with the remainder coming from software sales. Growth in the software division is being driven by increasing subscription fees and recurring product lines, with subscription software up 90% YoY to $58 million. 

Check Point is the latest in a number of new vendors added by a Dicker Data in 2019; others include Honeywell, Kaspersky, and Nutanix. Dicker Data aims to continue to introduce new vendors to reduce reliance on any single vendor. The contribution of the top 5 vendors reduced from 90% in FY12 to 57% in FY18. 

Foolish takeaway

With the introduction of Check Point, Dicker Data has taken another step towards diversifying its vendor concentration. The technology vendor has onboarded more than a dozen new vendors over the past 2 years to further enhance its offering. 

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Motley Fool contributor Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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