Electronics and IT distributor
) recently announced that its European arm, Avnet Memec has
entered into a contract with integrated circuits and memory
products manufacturer, Macronix International Co. Ltd. Per the
contract, Avnet Memec will act as a distributor for Macronix'
products across Pan-European regions. Financial terms of the deal
were kept confidential.
Macronix supplies NOR Flash, NAND Flash, ROM (Read Only Memory)
and EPROM (Erasable Programmable ROM) products. With these
products, Avnet will own a comprehensive portfolio of
semiconductor offerings. Avnet will distribute Macronix' flash
and memory products with the help of its logistics and
The semiconductor industry witnessed a bad phase in 2012 with
worldwide revenues declining 2.2% year over year. But, as per
U.S.-based IT research firm IDC, the semiconductor market is set
to enjoy roughly 3.5% growth in 2013.
Avnet Memec operates under Avnet's Electronics Marketing (EM)
group, which is a specialized semiconductor distributor and
provides supply chain management, inventory replenishment system
and non-complex engineering design services. During third quarter
2013 (announced in Apr), the EM segment grew 1.1% from year over
year to $3.80 billion. However, margins lacked luster due to slow
recovery and increased competitive pressure in the European
region. Avnet also guided 1.3% sequential growth (at the
mid-point) for the fourth quarter.
Though the near-term guidance for the EM segment is not very
encouraging, we believe that the projected growth in
semiconductor market and increased usage of flash devices in
different gadgets bodes well for the wholesale distributor, going
Avnet's third quarter revenues and earnings were better than the
Zacks Consensus Estimate. Nevertheless, macroeconomic
uncertainty, weak PC demand, softness in geographical
contributions, specifically from Americas, and continuous margin
contraction were the negatives. But we look forward to
management's decision to optimize costs; investments to tap
changing demand and pursue acquisitions for broadening product
Stiff competition from
Arrow Electronics Inc.
Ingram Micro Inc.
Richardson Electronics Ltd.
) is a concern.
Currently, Avnet has a Zacks Rank #3 (Hold).
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