Arrow Electronics Inc.ARW recently announced the completion of the acquisition of eInfochips, a product engineering and software services company.
eInfochips, founded in 1994 and headquartered in San Jose, specializes in chip designing for products and IoT solutions. Currently, it has more than 1,500 employees across its offices in India, the United States and Japan.
It has clients across various industries, including retail, industrial automation, healthcare, and aerospace. Per the company's website, 60% of its revenues come from Fortune 500 companies and 80% from solutions based on connected devices.
At the time of the announcement of the deal, it was valued at INR 1,800 crore per The Economic Times, which amounts to approximately $284 million per the currency exchange rate on that date.
The acquisition of eInfochips will not only broaden Arrow Electronics' IoT capabilities but will also add a large skilled talent pool. Apart from this, the acquisition will be accretive to the electronic parts distributor's top and bottom lines.
Arrow stock has gained 14.9% last year, substantially outperforming the 1.4% rally of the industry it belongs to.
Arrow Gains from Acquisitions
Arrow has been active on the acquisitions front. Over the last three decades, the company has acquired as many as 44 businesses. In 2016, the company made two important buyouts - UBM and Arrow ECS Australia.
Acquisitions are likely to enable Arrow to enter markets, diversify and broaden its product portfolio and maintain its leading position. Moreover, the company's continued acquisitions are expected to be a significant contributor to its revenue stream.
Arrow Electronics, Inc. Revenue (TTM)
Given the consistently rising number of connected products making their way into daily life, IoT is poised to grow strongly.
Per a recent report by MarketsandMarkets, the IoT market is expected to witness CAGR of 26.9% from $170.57 billion in 2017 to $561.04 billion in 2022. We believe this buyout provides the company with some key capabilities to cater to this huge opportunity.
Arrow carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector are NVIDIA Corporation NVDA , NetApp, Inc. NTAP and STMicroelectronics N.V. STM , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
The long-term expected earnings per share growth rate for NVIDIA, NetApp and STMicroelectronics is 10.3%, 11.3% and 5%, respectively.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.