Avnet posted better-than-expected second-quarter fiscal 2014
results. However, the guidance was less-than-encouraging due to
seasonality in the western regions and below-normal seasonality in
Asia. Nonetheless, we remain encouraged by management's decision to
optimize costs and investments to align the business with changing
demand. While Avnet's leading position in electronics distribution
and acquisition synergies are encouraging, stiff competition and
the impact of the sale of IBM's server business keep us on the
sidelines. Thus, we reiterate our Neutral recommendation on Avnet.
Based in Phoenix, AZ, Avnet Inc., (AVT) is one of the world's
largest distributors of electronic components and computer
products. The company's customer base includes original equipment
manufacturers (OEMs), electronic manufacturing services (EMS)
providers, original design manufacturers (ODMs), and value-added
resellers (VARs). Avnet maintains an extensive inventory, including
electronic products from over 300 component and system
manufacturers, which it distributes to about customers worldwide.
The company distributes products for companies including
International Business Machines Corp. and Hewlett-Packard Co.
The product set consists of semiconductors (approximately 53.0%
of fiscal 2013 revenue), computer products (37.0%), passives, and
electromechanical & other (7.0%) and connectors (3.0%). Avnet
operates in two segments Electronics Marketing (EM) and Technology
The EM segment distributes semiconductors and Interconnect,
passive and electromechanical devices (IP&E), and provides
supply chain management, inventory replenishment system and
non-complex engineering design services. In fiscal 2013, the EM
segment generated 59.0% of total sales (58.1% of 2012). The TS
Group distributes mid- and high-end servers, data-storage gear,
networking equipment and software services. Besides, in fiscal
2012, the TS segment generated about 41.0% of total sales (41.9% in
On a geographical basis, Avnet generated approximately 42.0% of
its revenues from operations in the Americas in fiscal 2013 while
Europe, the Middle East and Africa (EMEA) contributed about 29.0%.
The Asia/Pacific region accounted for 29.0% of revenues.
Avnet's major competitors include Arrow Electronics Inc., Ingram
Micro Inc., Future Electronics and World Peace Group.
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