Arrow Rebounds in Second Quarter, Buys Into Unified Comms
August 16, 2010 Timothy Prickett Morgan
As we report elsewhere in The Four Hundred, the IT and electronics components distribution businesses seem to be on the mend with master reseller Avnet showing a sharp rise in revenues and a return to profits. Rival Arrow Electronics has just turned in a decent quarter as well, and is buying its way into the expanding unified communications business.
In its second quarter ended July 3, Arrow brought in $4.61 billion in revenues, up 36 percent, and even with $5.6 million in restructuring costs was able to bring $116.2 million to the bottom line, up by nearly a factor of six compared to the year-ago quarter during the bottom of the economic downswing.
Arrow’s Enterprise Computing Systems group, the bit of the company that buys servers, storage, and software from the major IT players and then redistributes them to its downstream reseller partners who in turn sell to IT organizations, had sales of $1.35 billion, up 20.9 percent; operating profits for the IT unit of Arrow came to $43 million, up 24.8 percent.
“Storage, software, services, and industry-standard servers grew at very strong double-digits rates on a year-over-year basis,” said Michael Long, president, chief executive officer, and chairman at the company, in a statement accompanying the financial figures for Q2. “Sequential sales exceeded our expectations as here, too, our focus on sales excellence and our strategic investments in key solution segments is paying off.”
Arrow’s components business, always the largest part of the distribution biz, was up like a rocket by 43.5 percent to $3.26 billion, and operating income for the unit more than tripled to $182.5 million.
For the third quarter, the optimism continues, but the ECS business has some pretty wide brackets around its projected sales for Q3, reflecting the uncertainty in IT spending right now. Arrow said that it expects ECS sales to be between $1.07 billion and $1.27 billion. In Q3, Arrow says it thinks it can peddle between $3.32 billion and $3.52 billion in electronic components, which means total sales in the current quarter to $4.39 billion to $4.79 billion. Earnings are expected to be of 96 cents to $1.06 per share.
In addition to reporting its financial results, Arrow said that it had acquired Shared Technologies, which sells, installs, and maintains voice and data gear, including unified communications that brought in $250 million in revenues and will add immediately something on the order of 10 to 12 cents to Arrow’s earnings per share. The company expects the transaction to close by the end of September.