World's largest distributor of electronic components and
enterprise computing products
Arrow Electronics, Inc.
) recently declared its decision to acquire Redemtech, Inc.
(Redemtech). The acquisition, subject to regulatory ratification,
is likely to close within 60 days of the announcement date.
Redemtech, an operating unit of Micro Electronics, Inc. based in
Columbus, Ohio, is mainly engaged in the distribution of a range of
Electronics Asset Disposition (EAD) services, which includes
elimination and protection of data, restoration as well as
remarketing of electronic components. Redemtech with 250 employees
currently operates across the United States and provides services
to several end markets such as consumer market, government sector
and financial organizations.
The acquisition appears to be a quite profitable one for Arrow
as Redemtech has been yielding favorable results of late and is
expected to generate revenues of nearly $60 million in 2012. In
addition, management stated that this acquisition is likely to
solidify the company's foothold in the EAD market and it would
diversify and broaden its product portfolio, especially in the
growing emerging markets.
Arrow has retained a keen eye out for making profitable
acquisitions for its market expansion, improving its product
offerings and maintaining its leading position in the global
market. 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 macro-economic challenges prevailing
in the European region and slow growth in China adversely affected
the company's business in the quarter.
Arrow currently faces ominous competition from major players of
the industry, which includes
Richardson Electronics Ltd.
) in the industry. In order to retain its position in the global
market, it is imperative that the company continues to make such
momentous undertakings, keeping in mind the betterment of the
organization in both the long and short run.
The current Zacks Consensus Estimate for the third quarter of
2012 is $1.04, reflecting a year-over-year growth of (13.33%).
Estimates for 2012 and 2013 are $4.54 and $5.06, representing
annual growth of (12.50%) and 11.33%, respectively.
We currently maintain an 'Underperform' recommendation on Arrow.
The stock carries a Zacks #3 Rank, translating into a short-term
(1-3 months) 'Hold' rating.
ARROW ELECTRONI (ARW): Free Stock Analysis
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RICHARDSON ELEC (RELL): Free Stock Analysis
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