Server Reseller Avnet Shows Good Numbers in Fiscal Q1
October 30, 2006 Timothy Prickett Morgan
As one of the largest distributors of electronic components and a master resellers of IT systems that sits between the largest vendors and their downstream reseller partners, the financial ups and downs of Avnet are a good indicator of what is really going on in the IT economy. And, if Avnet’s first quarter of fiscal 2007 is any indication, the IT economy did pretty good in the third calendar quarter. But the fourth calendar quarter could be tougher than many expect.
For the quarter ended September 30, Avnet said that it had sales of $3.65 billion, up 11.6 percent over the same quarter last year. If Avnet excludes sales in fiscal 2006 related to divested business units and operations–including its Enterprise Solutions unit, which sold Hewlett-Packard servers and storage and which Avnet sold earlier this year–then sales increased by 14.2 percent in the quarter. Net income, even including these units in the year-ago figures, increased by a factor of 2.6 to $64.1 million.
Avnet’s Technology Solutions group, which distributes servers, storage, and software as well as performs IT services, posted sales of $1.21 billion in the quarter, up 4.8 percent as reported and up 8.9 percent if you take out the effects in the year-ago quarter for the HP Enterprise Solutions unit. Excluding this divested unit, Avnet Technology Solutions saw sales increase by 7.9 percent in the Americas and by 13.8 percent in EMEA, but sales were down 2.1 percent in the Asia/Pacific region. Operating income in the Technology Solutions group came to $39 million in the quarter, an increase of 19.8 percent. It isn’t hard to see why Avnet sold off the Enterprise Solutions unit to Logicalis.
Avnet’s Electronics Marketing group is the workhorse of the company, however, distributing components to over 100,000 customers worldwide. The Electronics Marketing group had sales of $2.44 billion in the first fiscal quarter, up 15.4 percent as reported and up 17.1 percent when excluding the results of units that were divested in the past year.
Looking ahead, Avnet said that its Technology Solutions group should post sales of $1.5 billion to $1.6 billion in its fiscal second quarter of 2007 (which corresponds to the final calendar quarter of 2006), and the Electronics Marketing unit is expected to have sales between $2.33 billion to $2.43 billion. That implies that sales in the Technology Solutions group in this quarter will be flat to slightly up, with the possibility of flat to moderately better growth in the Electronics Marketing group.