Avnet (AVT), AT&T Ink Deal to Expand in Internet of Things

Electronics and IT distributor Avnet Inc.AVT in collaboration with U.S. telecom giant AT&T Inc. T announced a new agreement to integrate AT&T's Internet of Things (IoT) managed services with Avnet's Global LTE IoT Starter Kit. We believe the new agreement will enable Avnet to scale up its business and enhance service offerings that garner significant market traction.

This latest IoT starter kit is likely to be released in the second quarter of 2017. However, the terms of the agreement have not been disclosed by the companies.

Per Tim Barber, senior vice president, global design chain business development of Avnet, "The combination of AT&T's IoT managed services and Avnet's new Global LTE IoT Starter Kit offers developers a unique set of tools and services that will simplify and accelerate the creation of connected IoT devices."

What Does this Mean for Avnet?

The agreement will enable Avnet's partners to access AT&T's cloud application development platforms (AT&T M2X and AT&T Flow Designer), thereby providing its channel partners with better solutions for IoT. It will also enable Avnet to provide powerful, simple-to-use tools that enable fast and cost-effective development of IoT solutions, thus improving Avnet's revenue stream and possibly its market share.

Per an IDC report, by 2020, the IoT market is projected to be worth $1.7 trillion with 30 billion connected "things".

Given the huge opportunity, its progress in the IoT space with its strategic partnerships and initiatives will translate to decent growth prospects for Avnet.

The Motive

Avnet and AT&T clearly see the Internet of Things as the next major market. We believe that such initiatives in the industrial space will allow Avnet to transform its model for the better. The agreement will pave the way for the two companies to more effectively connect their respective know-how to support and develop the production of next-generation IoT devices with worldwide cellular connection.

Bottom Line

Continuing to expand its presence in the IoT space, the company in partnership with relayr announced a unique service, relayr's 5-4-3 Innovation Acceleration process that supports IoT in the U.S. and Canada.

We believe that the latest efforts will help Avnet as it pursues opportunities in the ever-growing IoT space.

Note that Avnet has been taking major restructuring steps to focus on the EM business. The divestment of the Technology Solution division will allow Avnet to focus on high growth areas such as marketing electronic components and related products in the supply chain. The company intends to use its resources to make investments in embedded solutions, IoT and critical digital platforms as well as expand its footprint in newer markets.

Despite the company's strategic initiatives to expand in newer markets, the stock generated a return of just 13.66% over the last one year compared with the Zacks Electronic Parts Distributor industry's gain of 33.15%.

Furthermore, a significant portion of Avnet's revenues comes from the sale of semiconductors, which is a cyclical industry, characterized by changes in technology and manufacturing capacity and subject to significant market upturns and downturns. Intensifying competition from Arrow Electronics Inc. ARW also remains a headwind.

Currently, Avnet carries a Zacks Rank #3 (Hold). A better-ranked stock in the technology sector is Seagate Technology plc STX , carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here

Seagate has a long-term expected earnings per share growth rate of 8.17%.

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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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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