This article is more than 1 year old

System sales might have hit bottom

Avnet and Arrow are hopeful

For fiscal 2009, Avnet's sales came to $16.23bn, down 9.6 per cent, and because of various write-offs and restructuring charges, the company reported a $1.12bn net loss for the year.

Looking ahead, Avnet is anticipating that in the first quarter of fiscal 2010 ending in September it can bring in somewhere between $3.6bn and $4.2bn in revenues across its systems and electronics businesses, with earnings per share in the range of 29 cents to 37 cents.

Those numbers are predicted on Technology Solutions raking in between $1.55bn and $1.85bn in revenues and Electronics Marketing getting between $2.05bn and $2.35bn in sales. In fiscal 2009's first quarter, Avnet had sales of $4.49bn and brought $92.9m to the bottom line, which worked out to 61 cents per share.

Arrow Electronics

Over at Arrow, the other key systems and electronics component master distributor, the second quarter ended June 29 came in at the high end of the company's expectations, and Arrow was profitable as well, despite the poor economy.

In Q2, Arrow posted $3.39bn in sales, down 22 per cent, and operating income fell by a factor of three to $51.1m. Net income fell by 78.1 per cent to $21.1m.

I said Arrow was profitable. I didn't say there was a lot of money down there on the bottom line for the second quarter, or that profits hadn't been slammed.

Arrow's Enterprise Computing Solutions group had sales of $1.12bn, down 19 per cent compared to the year-ago quarter, and not including acquisitions, sales were actually off 24 per cent as reported.

"ECS sales were at the low end of our expectations, due to lower demand and IT spending, as capital-intensive projects continue to be highly scrutinized," explained Michael Long, Arrow's chief executive officer, in a statement going over the company's financial results. "With strong operating margins and cash flow, we remain confident that our strategy of portfolio diversification will continue to provide benefits, as the need for complex technology systems to provide security and storage solutions has not diminished despite the macro headwinds."

Arrow's Global Components business had $2.27bn in sales in the second quarter, down 23 per cent, hitting the mid-point of Arrow's expectations.

Looking ahead, Arrow said that it had another $100m in costs it planned to take out, predominately in its European operations, during the second half of 2009. Arrow expects its Enterprise Computing Solutions group to have revenues between $1bn and $1.2bn in the third quarter, ending in September, and its Global Components group to have sales ranging from $2.1bn to $2.5bn.

Adding it up, Q3 at Arrow should come in at between $3.1bn and $3.7bn in revenues, with earnings per share of between 25 cents and 37 cents. In 2008's third quarter, Arrow had sales of $4.35bn and brought $96.2m, or 79 cents per share, to the bottom line. ®

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