Avnet Rides Server and Storage Waves in Fiscal Q3
May 23, 2011 Timothy Prickett Morgan
In the third quarter of fiscal 2011 ended April 2, Avnet posted $6.67 billion, up a very impressive 40.3 percent. Net income for the seller of IT gear and electronic components rose by 31.9 percent, to $151 million. Acquisitions are a big part of that growth story, of course, and on a pro forma basis excluding the effect of companies that have been brought into the Avnet fold, sold off, or unit movements within the company, overall revenues for Avnet grew 13 percent.
The Technology Solutions unit of Avnet distributes servers, storage, software, and various IT services to downstream resellers, who in turn peddle them to end user companies, had $2.75 billion in sales, up 46.9 percent as reported and up 13.2 percent on a pro forma basis. The Technology Solutions unit had $1.51 billion in revenues from the Americas region (up 38.9 percent), $847 million from EMEA (up 59.5 percent) and $393.6 million from Asia (up 54.8 percent). Operating income for Technology Solutions rose by only 7.4 percent, however, to $57.3 million.
Roy Vallee, Avnet’s chairman and chief executive officer, said in a statement accompanying the financial results that Technology Solutions came in at the high end of expectations revenue-wise, with sequential declines from the prior fiscal second quarter (which roughly corresponds to calendar year end IT budgets) being lower than usual. The growth in the business was due primarily to server and storage sales, Vallee said.
Avnet’s Electronics Marketing unit had $3.93 billion in revenues, up 36 percent, with pretty balanced performance across the Americas, EMEA, and Asia regions. This unit had $224.8 million in operating income, up 80.6 percent.
Looking ahead to the fourth quarter of fiscal 2011 ending July 2, Avnet expects for Technology Solutions to have sales between $2.75 billion and $3.05 billion. That’s around 40 percent growth from last year’s $2.1 billion in sales in the prior year’s quarter at the mid-point of the Q4 fiscal 2011 range. Electronic component sales are expected to be between $3.85 billion and $4.25 billion, and that wide range is due in part to the unknown (and as yet unknowable) effects of the March earthquake and tsunami in Japan. Earnings per share are expected to be in the range of $1.10 and $1.22, which is a bit better than the $1.10 Avnet turned in during Q3.
Separately, Avnet has acquired French virtualization value-added distributor Amosdec. The company is a partner of server and desktop virtualization juggernaut VMware and network disk array maker NetApp as well as a number of partners who have add-ons for managing virtual desktops and servers. The company does not appear to be a server distributor, but obviously, if you are doing virtual desktop infrastructure or storage management, there are systems involved.
It is not clear what Avnet will do with Amosdec beyond integrating it into its Technology Solutions unit. Amsodec was founded in 1990 and is located in Paris; in the 2010 calendar year, the company generated around $90 million in revenues peddling virtualization and storage management products. France represents the third largest IT market in Europe, behind Germany and the United Kingdom, and Amosdec has more than 500 of its own downstream partners in France, which Avnet wants to reach with a broader array of products.