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Vernon Hills, Ill.-Based CDW Posts Third-Quarter Net Profit Increase

Posted on: Tuesday, 18 October 2005, 21:00 CDT

By Mike Hughlett, Chicago Tribune

Oct. 19--Vernon Hills-based CDW Corp. Tuesday posted a healthy 12.2 percent increase in third quarter net profits, beating Wall Street estimates.

CDW, which sells computer hardware and software to businesses and governments, also said it will expand its downtown Chicago offices. While that's good news for Chicago, Wall Street saw bad news: Increased expenses stemming from real estate moves will trim short term profits.

CDW shares were down $2, or 3.52 percent Tuesday, closing at $54.80.

CDW reported third quarter net income of $73.1 million or 88 cents per diluted share, up from $65.2 million or 76 cents in 2004's third quarter.

Analysts polled by Thomson Financial had expected per share profits of 86 cents and revenues of $1.66 billion. CDW reported revenues of $1.67 billion.

"The quarter was good," said Bruce Simpson, an analyst at William Blair & Co. in Chicago. "The (stock) market is doing 'shoot first and ask questions later,'" he said.

In a conference call Tuesday, CDW said real estate-related expansion expenses will cost $25 million through 2006.

In turn, CDW said its operating profit margin, which has been ranging from 6.5 to 7 percent, will drop to a range of 6.1 to 6.6 percent through the end of 2006.

The biggest chunk of CDW's expansion expenses stem from a new distribution center in Las Vegas, which is slated to open later this year.

But CDW also plans an expansion in the West Loop, where it employs 950 in two sales offices.

The Tribune recently reported that CDW is negotiating to consolidate those offices into one at 120 S. Riverside Plaza, increasing its total space from 144,000 square feet to up to 240,000 square feet.

John Edwardson, CDW's chief executive officer, said the offices would be consolidated, but declined to give further details. "Let's put it this way, we plan to significantly grow the number of people we have in downtown Chicago in the next five years."

CDW also has a north suburban sales office with 1,050 employees. And it employs about 1,500 at its corporate headquarters and distribution center in Vernon Hills.

The company has run out of room in Vernon Hills, too, and is leasing additional space nearby.

"In order to grow, we need more real estate," Edwardson said.

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Source: Chicago Tribune

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