Avnet's Second Fiscal Quarter Propped Up By EMEA Sales

Published: February 15, 2007

by Timothy Prickett Morgan

IBM's System i5 server business might have been down 10 percent in the fourth quarter of 2006, and System p5 Unix sales might have been soft with only a 4 percent decline, but master reseller Avnet, made the best of it and still managed to grow its overall electronics and technology distribution businesses in its second quarter of fiscal 2007 ended December 30.

Avnet posted overall sales of $3.89 billion in the quarter, up 3.5 percent compared to the same quarter in fiscal 2006 (and which corresponded to the calendar fourth quarter of 2005). Avnet brought $99.1 million to the bottom line, nearly double the profits it posted in the year ago period.

The sales that Avnet posted did not include sales from its recently acquired Access Distribution server distribution business, which the company acquired from General Electric in November 2006 for $412.5 million. That deal did not complete until December 31, and is expected to add approximately $2 billion a year in sales to the company--mostly from the sale of servers, storage, and software from Sun Microsystems.

During the quarter, Avnet's Technology Solutions unit, which sells IT solutions, were up 3.7 percent to $1.56 billion, smack in the middle of the target that Avnet gave to Wall Street in November 2006 just prior to announcing the Access Distribution deal. If you take out the Enterprise Solutions unit that Avnet sold in January 2006 (which sold products and integration services on Hewlett-Packard ProLiant and Integrity servers), growth in the Technology Solutions unit rose by 7.3 percent, with growth of 3.5 percent in the Americas and 17.5 percent in the Europe/Middle East/Africa region. Negating the effect of the HP Enterprise Solutions unit, sales in Asia for the Technology Solutions unit were flat, which is a bit surprising given the rampant growth in India, China, Indonesia, and Singapore these days.

Luckily for Avnet, sales of electronics components in Asia grew by 7.5 percent and in EMEA were up 9.4 percent, helping drive revenues for the Electronics Marketing half of Avnet up 3.4 percent to $2.33 billion.

Looking ahead to its fiscal third quarter of 2007, which will end in March, Avnet says that it expects sales in the range of $4.1 billion to $4.3 billion, with Technology Solution sales between $1.67 billion and $1.77 billion, including the new Access unit. Electronics distribution is expected to rake in between $2.43 billion and $2.53 billion.

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