) recently declared the acquisition of Genilogix LLC. This was
done with the clear intent of strengthening Avnet's HP software
solutions and Cloud services. This acquisition shall not only be
immediately accretive to Avnet's earnings but will also help it
achieve its return on capital (ROC) target of 12.5%.
Genilogix is primarily engaged in providing various IT
services to its clients for augmenting the safety, efficiency and
quality of mission-critical applications. Genilogix is considered
as a HP Software Enhanced Elite Partner, which offers application
lifecycle management solutions to various enterprises. The
company's revenue was nearly $23 million in 2011.
Avnet expects the acquisition to broaden its footprint in the
IT solutions market and help the company to meet the increasing
customer demand through providing cost effective
solutions. The company's recently acquired Pepperweed
Consulting along with Genilogix will be involved in augmenting
Avnet's IT service offerings in the field of healthcare and
government. Post acquisition, Genilogix will conflate with Avnet
Technology Solutions' Americas business.
The company's continuous acquisitions are expected to be a
good contributor to its revenue stream going forward. During
fiscal 2012, the company completed acquisitions of eleven
businesses with total annualized revenues of $900 million. These
acquisitions are expected to bolster its performances quite
comprehensively and augment its product base going forward.
Avnet's domestic and foreign operations are subject to
significant competitive pressures. It faces stiff competition
Arrow Electronics Inc.
), which remains a fiercely formidable rival. Arrow's recent
acquisition of ALTIMATE Group, Global Link Technology and
Redemtech can turn out to be highly profitable, thereby posing a
serious threat to the future of Avnet. In addition, big players
to keep an eye out for in this regard include
Anixter International Inc.
Richardson Electronics Ltd.
The current Zacks Consensus Estimates for Avnet are 83 cents
and $3.22 for the second quarter of fiscal 2013 and for fiscal
2013, respectively. The estimates represent a year-over-year
growth of (27.7%) for the second quarter and (20.6%) for fiscal
2013. The company currently retains a Zacks #5 Rank, which
translates into a short-term 'Strong Sell' rating. We also
maintain a long-term 'Underperform' recommendation on the
ARROW ELECTRONI (ARW): Free Stock Analysis
AVNET (AVT): Free Stock Analysis Report
ANIXTER INTL (AXE): Free Stock Analysis
RICHARDSON ELEC (RELL): Free Stock Analysis
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