• The Four Hundred
  • Subscribe
  • Media Kit
  • Contributors
  • About Us
  • Contact
Menu
  • The Four Hundred
  • Subscribe
  • Media Kit
  • Contributors
  • About Us
  • Contact
  • Server Sales Hiccup Stalls Avnet In September Quarter, December Sobering Up

    October 29, 2012 Timothy Prickett Morgan

    System and component sales at master reseller Avnet took a pause in the fiscal quarter ended in September, catching the company’s top brass a bit unawares as the declines were larger than expected. You can blame the U.S. presidential election and the uncertainty surrounding that as well as the uncertainty in certain debt-laden countries in Europe, if that makes you feel better.

    IBM had some software sales slip in the third quarter in its emerging markets that made its numbers worse than expected, as The Four Hundred previously reported, but at the same time Big Blue’s System x, Power Systems, mainframe, and storage sales all took a whack as customers pulled back on spending and pushed out deals because of the economic uncertainty as well as because of product transitions, particularly with Power Systems and mainframes. Avnet is part of the same sales channel, so it is no surprise for the same quarter ending in September, which is the first quarter of Avnet’s fiscal year, that it had similar problems. In a way, Avnet’s component sales are a leading indicator for the larger electronics and systems market, and its systems sales are a lagging indicator for system makers like IBM.

    In the first fiscal quarter, Avnet’s sales were off 8.7 percent, to $5.87 billion, and its net income fell 27.9 percent to $100.3 million. This was the fifth consecutive quarter of declines for Avnet in Europe, down 8 per cent at constant currency, and the Americas region was off 14 percent. Rick Hamada, chief executive officer at Avnet, laid the blame for the surprise clearly on the Americas region. “While Q1 is typically our weakest revenue quarter each fiscal year, our sequential revenue decline was beyond normal seasonality due primarily to the unexpected double-digit percentage decline in our Americas region across both operating groups,” Hamada said in a conference call with Wall Street analysts. In other words, Europe being in trouble was already expected, as it has been for two years now.

    The Technology Solutions side of Avnet, which distributes IT gear, software, and services, took a bigger hit than the components business. Electronics Marketing, as that business is known, had sales of $3.65 billion, down 4.3 percent, with operating income off 23.5 percent to $146.3 million. Technology Solutions stomached a 15.1 percent drop, to $2.22 billion, with sales in the Americas down 16.1 percent to $1.16 billion. Technology Solutions pushed $635.5 million in stuff in EMEA, down 18.4 percent (and I have to believe that amount of decline was surprising, too), and even Asia had a 5.9 percent hit to $416.8 million. That last two weeks of September were when the brakes were pushed, said Hamada.

    The acquisition of IT distributor Magirus, which closed last month, will help the second fiscal quarter ended in December, but that may not change the underlying trajectory for the pre-Magirus Technology Solutions business. In normal years, Magirus was about $500 million a year in revenues.

    The September quarter was about $200 million lighter than expected, and the blame was on–you guessed it–proprietary servers. Phillip Gallagher, president of the Technology Solutions unit, said in the call that on a global basis x86 servers were actually up “close to double digits,” which I think means 9 percent, and that storage, networking, and virtualization revenues were up. But Gallagher also said that servers overall had the biggest drop, and followed by PC component sales, which for some reason are in the Technology Solutions unit instead of Electronics Marketing. (I did not know that.) You can blame delayed Power7+, Itanium 9500, and Sparc T5 server launches for that, and maybe some System z mainframes if Avnet gets a piece of that action. (Which I seriously doubt.) When pressed for some more precision, Gallagher said that industry standard servers (which is channel-speak for x86 boxes) was up in the range of 10 to 15 percent (that’s solid double digits as far as I can tell) and that proprietary servers (which now appears to include anything not x86, which is a funny new definition of that word that I think is actually more accurate as long as you apply it to x86 chips, too), were off in the 20 percent range. In other words, Avnet’s server business in RISC/Unix and other proprietary systems took a much bigger hit than IBM did.

    What Avnet did not say–and what it should have said if it were true–is that downstream customers were less eager to take current gear with so much new stuff on the way, and those that did wanted bigger price breaks on it. No surprises on either fronts, if this turns out to be the case. Intel still hasn’t launched the Itanium 9500 chips, Oracle didn’t launch the Sparc T5 processors as many expected, and IBM pushed out the Power7+ launch to early September and then only put it into Power 770+ and Power 780+ machines. I am no prognosticator, but I think it is safe to say that customers are going to wait to see what the entry and midrange Power7+ machines look like before they buy, if they can wait. So the December and March quarters are not going to be much fun for Avnet or IBM, either. And possibly Arrow Electronics, too.

    What Hamada did make clear was that he did not think we were heading into a recession, and this was not an issue with rebates up and down the channel, which caught Avnet off guard in early 2008. “It wasn’t a major rebate story like in 2008 when there were a bunch of cliff-vested types of incentives, where you either get 0 or 100 percent or 0 and or some factor that created that debacle back in, if I remember correctly, the March quarter of 2008. So the R word really isn’t a major part of the story here. Again, the R word that applies is revenue. It was the shortfall in revenue that really drove the issue here.”

    Looking ahead, Avnet expects for Technology Solutions to post sales of $2.6 billion and $3 billion in the December quarter, which is its second quarter of fiscal 2013. That would represent sequential growth from fiscal Q1 of 17 percent at the midpoint of the range, which is significantly lower than the typical uptick of 20 to 25 percent that it sees in the jump from the September to December quarters. But it sure beats a 20 percent decline, too. Electronics Marketing is expected to see a 6 percent sequential decline at the midpoint of a revenue range of $3.35 billion to $3.65 billion.

    In a related story, Avnet said that it was working with IBM’s business partners in Europe following its acquisition of Ascendant Technology to boost sales of services related to middleware infrastructure automation and social business in the cloud. These services, which have been available in the United States and Canada, are now being rolled out in the United Kingdom, Germany, Austria, Switzerland, the Czech Republic, Slovakia, Hungary, Poland, Romania, Belgium, and Turkey. Avnet bought Ascendant back in April.

    RELATED STORIES

    Vallee To Retire From Avnet As Revenues And Profits Weaken

    Avnet Schools Partners On Pushing Innovation

    Avnet Eats The Rest Of Magirus

    Avnet Components And Technology Solutions Businesses Both Slip

    Avnet Jumps For WebSphere, Rational Services Provider

    Arrow And Avnet Ride System Upgrade Waves In Recent Quarter

    European Slowdown Puts The Profit Squeeze On Avnet



                         Post this story to del.icio.us
                   Post this story to Digg
        Post this story to Slashdot

    Share this:

    • Reddit
    • Facebook
    • LinkedIn
    • Twitter
    • Email

    Tags:

    Sponsored by
    FOCAL POINT SOLUTIONS GROUP

    IntellaFLASH™

    FPSG is the only hosting provider that offers IntellaFLASH™.  IntellaFLASH was created by FPSG and is an exclusive FPSG solution that provides the following:

    • No User downtime for production backups
    • Supports BRMS and Tivoli Storage Manager
    • Provides near Continuous Data Protection (CDP)
    • Create point-in-time copies of your entire environment within minutes
    • Easy and quickly repeatable
    • Processes are tied into Job Schedulers
    • No user downtime for planned outages
    • No disruption to the send and receive process production, and DR stays in sync during the Switch test
    • Supports heterogeneous environments
    • Create test/development environments on the fly
      ⇒ Simplify operating system/application upgrade testing efforts
      ⇒ Improve quality assurance testing

     

    Watch our IntellaFLASH™ Video to learn more

    Let’s Discuss Your Custom Solution Needs

    ContactUs@FocalPointSg.com

    Follow us on LinkedIn

    focalpointsg.com | 813.513.7402

    Share this:

    • Reddit
    • Facebook
    • LinkedIn
    • Twitter
    • Email

    UNICOM Nabs Versant for Object-Oriented Databases Running IBM i Access 7.1 and Windows 8

    Leave a Reply Cancel reply

Volume 21, Number 38 -- October 29, 2012
THIS ISSUE SPONSORED BY:

BCD
Vision Solutions
Abacus Solutions
Adsero Optima
RJS Software Systems

Table of Contents

  • Gartner Says Big Data Getting Bigger, Skills Lag
  • Cisco: Data Center Traffic To Quadruple Thanks To Clouds
  • Arrow Empowers Partners To Peddle Converged Systems, Eats Another IT Recycler
  • SAP Powers Shakes Off World’s Economic Jitters In The Third Quarter
  • IBM i Innovators Rise And Shine
  • Watson Gets Schooled By College Students And Professors
  • Thanks For The (Higher Priced) Memories?
  • Knowledge Is Power When Assessing Your IBM i Legacy
  • Server Sales Hiccup Stalls Avnet In September Quarter, December Sobering Up
  • As I See It: Born Again Computers

Content archive

  • The Four Hundred
  • Four Hundred Stuff
  • Four Hundred Guru

Recent Posts

  • COMMON Set for First Annual Conference in Three Years
  • API Operations Management for Safe, Powerful, and High Performance APIs
  • What’s New in IBM i Services and Networking
  • Four Hundred Monitor, May 18
  • IBM i PTF Guide, Volume 24, Number 20
  • IBM i 7.3 TR12: The Non-TR Tech Refresh
  • IBM i Integration Elevates Operational Query and Analytics
  • Simplified IBM i Stack Bundling Ahead Of Subscription Pricing
  • More Price Hikes From IBM, Now For High End Storage
  • Big Blue Readies Power10 And IBM i 7.5 Training for Partners

Subscribe

To get news from IT Jungle sent to your inbox every week, subscribe to our newsletter.

Pages

  • About Us
  • Contact
  • Contributors
  • Four Hundred Monitor
  • IBM i PTF Guide
  • Media Kit
  • Subscribe

Search

Copyright © 2022 IT Jungle

loading Cancel
Post was not sent - check your email addresses!
Email check failed, please try again
Sorry, your blog cannot share posts by email.