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Avnet, Inc. (AVT): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

1/27/2014 7:00:00 AM
Referenced Stocks:AVT;TS

Avnet posted mixed third-quarter results. The guidance was less-than-encouraging due to seasonality. Moreover, a significant portion of the company's revenues comes from the sale of semiconductors, which is a cyclical industry characterized by changes in technology and manufacturing capacity and is subject to significant market upturns and downturns. 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, it faces stiff competition in both domestic and foreign operations, especially from archrival Arrow Electronics. 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 Solutions (TS).

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 2012).

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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