Arrow Electronics Inc.
) signed a global distribution contract with
Microchip Technology Inc.
). This was done with the clear intent of improving Arrow's
customer services through ameliorating its end product
Incorporated in Delaware, Microchip is involved in developing
and manufacturing microcontrollers, memory, analog and interface
products for embedded control systems. The company's
microcontrollers business continues to grow at a rapid pace and
account for a large chunk of its total business.
This agreement will add Microchip's service solutions and wide
array of embedded semiconductors, microcontrollers, wireless
support solutions and memory devices to Arrow's product database.
In addition, according to this contract, Microchip's other service
offerings will now also be accessible through Arrow's Nu Horizons
Management was quite optimistic regarding its decision to
conflate with Microchip as its improved design and technology would
enhance the company's existing product offerings.
Arrow's series of contract wins and acquisition activity may
certainly have a positive impact on its businesses. However, the
company recently reported total sales of $5.15 billion in the
second quarter of 2012, down 7% year over year and 5.3%
sequentially. The current macroeconomic challenges prevailing in
the European region and slow growth in China adversely affected the
company's business in the quarter.
Arrow pertains to an industry where ominous competition is
prevalent. Hence, the company should stay cautious of big players,
Richardson Electronics Ltd.
) in the industry.
The current Zacks Consensus Estimate for the third quarter of
2012 is $1.04, reflecting a year-over-year growth of (12.96%).
Estimates for 2012 and 2013 are $4.54 and $5.12, representing
annual growth of (12.50%) and 12.75%, respectively.
We currently maintain an 'Underperform' recommendation on Arrow.
The stock carries a Zacks #4 Rank, translating into a short-term
(1-3 months) 'Sell' rating.
ARROW ELECTRONI (ARW): Free Stock Analysis
AVNET (AVT): Free Stock Analysis Report
MICROCHIP TECH (MCHP): Free Stock Analysis
RICHARDSON ELEC (RELL): Free Stock Analysis
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