Avnet Bounces in Q4 Thanks to V-Shaped IT Recovery
August 16, 2010 Timothy Prickett Morgan
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The economic meltdown put system and electronic component sales on a sharp decline, and as far as master distributor Avnet is concerned, these two markets have bounced back as the company closed out its fiscal 2010. In the fourth quarter of fiscal 2010 ended July 3, Avnet posted $5.21 billion in total revenues, up 38.5 percent from the year-ago period. The big boost in revenues helped Avnet swing from a $30.9 million loss in Q4 of fiscal 2009 to a $141.1 million profit this time around. “The V-shaped cyclical recovery in the technology markets we serve continued this quarter, with strong top line performance across both groups and all regions, resulting in 38.5 percent year-over-year growth and record revenue,” Roy Vallee, Avnet’s chief executive officer and chairman, said in a statement accompanying the financial results. “The combination of record revenue, gross profit margin expansion, and productivity gains drove operating income margin up sequentially and year over year at both operating groups with the EMEA region delivering the most significant improvement.” Avnet’s Technology Solutions group, which distributes just about every server, storage array, and bit of software you can think of to downstream resellers, had $2.09 billion in revenues in fiscal Q4, an increase of 27.5 percent; at constant currency, revenues were up 28.6 percent. In Avnet’s Americas region, Technology Solutions had $1.29 billion in sales, up 26.7 percent, while sales in EMEA rose only 15 percent to $534.6 million (but were up 21 percent at constant currency). Asia/Pacific technology sales were up an astonishing 70 percent, to $267.4 million. Operating income for Technology Solutions was still pretty skinny, at $62.2 million, an increase of 51 percent from the year-ago quarter. Vallee said that server growth was “particularly strong” in Q4, up 30 percent sequentially from fiscal Q3 and up 29 percent over the year-ago quarter. Avnet’s Electronics Marketing group had $3.12 billion in revenues in the fourth quarter, up 46.9 percent. Operating income nearly tripled to $173.8 million in the quarter. Electronic component makers slammed on the production brakes when the economy started heading south, and they have not yet ramped up to full production, which means you have consumer and corporate device makers creating more demand for many components than there is supply to meet them. This suits chip and other component makers just fine, as well as their master distributors, since it forces prices and profits up. For the full year, Avnet had $19.2 billion in revenues, an increase of 18.1 percent compared to fiscal 2009, and brought $410.4 million to the bottom line compared to a loss of $1.12 billion a year ago. Looking ahead to the first quarter of fiscal 2011 ending October 2, Avnet is projecting the Technology Solutions group will have somewhere between $2.25 billion and $2.55 billion in sales, a nice sequential bump from the quarter just ended. The Electronics Marketing group is anticipating $3.35 billion to $3.65 billion in revenues. That puts total sales at somewhere between $5.6 billion and $6.2 billion. Earnings are expected to be in the range of 76 cents to 84 cents per share. RELATED STORIES Avnet Expands in Latin America, Promotes COO to President Cisco Taps Avnet to Peddle ‘California’ Unified Servers Arrow, Avnet Report Better Than Expected Enterprise Sales Avnet, Infor Join iManifest EMEA Program Avnet and Arrow: System Sales Might Have Hit Bottom Distributors Arrow and Avnet Deal with the Meltdown Avnet Hit By Economic Downturn in Fiscal Q2 Avnet Partners with Sanko for Turkish Expansion Avnet to Resell VDoc Content Management Suite in U.S. Arrow and Avnet Say Their June Quarters Exceeded Expectations Avnet Buys Ontrack for Asian Expansion Avnet Expands in the United Kingdom and Ireland with Horizon Buy
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