Avnet Components And Technology Solutions Businesses Both Slip

May 14, 2012 Timothy Prickett Morgan

Master reseller Avnet had a somewhat different quarter from rival Arrow Electronics in its most recent quarter, its fiscal 2013 third quarter ended in March. Both its components and systems groups took a hit.

In the quarter, Avnet’s Technology Solutions group, which buys systems, storage, software, and services from IT vendors and distributes them through channel partners worldwide, had an 8.1 percent revenue decline, to $2.52 billion. Sales in the Americas region for Technology Solutions fell 9.1 percent to $1.37 billion, and in EMEA they dropped 12.1 percent to $744.8 million; in Asia, sales were up 4 percent to $409.3 million. Operating income for Technology Solutions was, however, up 10.6 percent to $67.9 million.

Arrow’s Electronics Marketing group, which sells all manner of electronic components, had sales of $3.76 billion (down 4.3 percent) and had an operating margin of $194.3 million (down a very tough 30.5 percent).

Add them up, and Avnet’s sales in fiscal Q3 were $6.28 billion, down 5.9 percent, and net income was down a smidgen to $147.6 million.

In a conference call with Wall Street analysts, Rick Hamada, Avnet’s CEO, said that the results for the Technology Solutions unit were more or less in line with expectations and marked the third quarter in a row for both revenue and profit growth for the systems side of Avnet. Hamada said that X86 servers and services had double-digit growth on a year-on-year basis, and storage sales were up in the high single digits, but processor upgrades and other system component sales in the Technology Solutions unit were off.

Looking ahead to its final quarter of fiscal 2012 ending in June, Avnet expects for Technology Solutions to have sales of between $2.55 billion and $2.85 billion, with the components side generating $3.75 billion to $4.05 billion; that brings total sales of between $6.30 billion and $6.90 billion, and non-GAAP earnings per share is pegged at $1.05 to $1.13.