John Edwardson, CEO of CDW (NASDAQ:CDWC), recently opened up to The Motley Fool about the future of his company, a two-time Motley Fool Stock Advisor recommendation. Here's what he had to say about earnings, inventory, expansion, and more.

Rich Smith: As big as CDW is in the business world, it's not really a household name among consumers. Can you outline what CDW does?

John Edwardson: Sure, CDW provides brand-name technology products and services to businesses, as well as government agencies and educational institutions. We help our customers find the right technology for their needs, and we get it to them when they need it. We strive to provide the best technology-buying experience so we can help our customers achieve their goals.

RS: "Direct marketing"conjures up pictures of telemarketers hawking timeshares in the Florida Everglades. Does direct marketing have a different meaning in the context of CDW's business?

JE: CDW sells and markets "direct" to customers, meaning we establish and maintain one-on-one relationships with our customers. Each customer is assigned a CDW account manager who gets to know the customer and their business or organization . that's how we are best able to provide the right technology for a particular customer. Our vendor partners -- top names in the technology industry like Hewlett-Packard (NYSE:HPQ), Microsoft (NASDAQ:MSFT), Lenovo, and hundreds more -- want to leverage our ability to know the markets into which we sell. Those are the same markets that our vendor partners want to be in, so they come to us to market and sell directly to these customers.

RS: Since you joined CDW, your company has grown both revenues and earnings every single year -- with the exception of 2003. This happened while the economy in general was collapsing, and newspapers were filled with stories of companies slashing IT spending. How is it that with no one (reportedly) buying, you kept on selling more and more?

JE: It's a testimony to our business model and the hard work of our coworkers, who I truly believe are the best at what they do. Even in the slow times, customers value a technology company who can provide the kind of value we offer: expertise on technology products and services, competitive pricing, account manager relationships, and fast shipping. And when you back that up with a great team of people who are driven to succeed and serve the customer, it's a recipe for success.

RS: In the Risk Factors section of the company's most recent 10-K, you mention that your success relies in part on maintaining a "rapid-turn inventory model." In each of the past two quarters, your inventory turns declined both sequentially and year over year. Does this performance disturb you and, if so, how are you planning to fix it?

JE: A higher inventory turn number means a faster turnover, so higher is better. In the first quarter of 2006, our annualized inventory turnover improved (rather than declined) to 24 turns from 23 turns in the first quarter of 2005. In the second quarter of 2006, our annualized inventory turnover declined to 23 turns from 25 from a year earlier.

In mid-December 2005, we began shipping out of our new 513,000-square-foot state-of-the-art Western Distribution Center (WDC) in Las Vegas, Nev. CDW has historically had one distribution center located in Illinois, so this is the first time CDW has managed multiple distribution centers. As one would expect, there is a learning curve for balancing inventory between the two facilities as operations continue to ramp in the WDC. By the end of the second quarter of 2006, we shipped approximately 30% of our total volume from the WDC. Our goal is to ship approximately 40% of our total volume from the WDC by the end of 2006. Our inventory turn objective is 25 turns annually.

RS: CDW says its vision is to be the world's biggest and best direct technology provider for business, government, and education. Outside North America, which markets do you think CDW's business model fits best? Are you making any moves to enter these new markets?

JE: As you know, we have challenged ourselves to reach $10 billion in revenue by the end of 2008. This would likely come from a combination of organic growth and acquisition. Some of that growth could come from international expansion, which could include investigating opportunities in China.

RS: In your April earnings release, you asserted "we continued to take market share" in the first quarter of 2006. Presumably, you took this market share from someone. I'm going to list several companies that you named as competitors in your most recent 10-K:

  • Dell (NASDAQ:DELL)
  • Circuit City (NYSE:CC)
  • Staples (NASDAQ:SPLS)

Which of these did you take the most market share from so far in 2006? Which looks most vulnerable through the rest of this year? If you could wave a magic wand and have one of these rivals disappear, who would it be?

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Fool contributor Rich Smith owns shares of Dell. Dell and Microsoft are Inside Value picks. Dell is also a Stock Advisor pick. The Motley Fool has a disclosure policy.