Arrow Electronics component arm hits the mark in solid Q1

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Arrow Electronics component arm hits the mark in solid Q1

Microscope contributor

Arrow Electronics' component business was the profit and revenue driver in a solid set of first quarter financials but a decline in server sales hindered growth in its infrastructure division.

For the period ended 3 April, profits grew 225% to $87m (£57.6m) while revenues increased 24% to $4.2bn (£2.78bn).

Sales at the Global Components arm soared 33% to $3.1bn as Enterprise Computing Systems (ECS) grew just 3% to $1.1bn.

The components business "performed extremely well this quarter amidst recovering global economic conditions," said Arrow boss Michael Long.

He estimated that the company could have sold $100m worth of additional processors and modules if the industry had kept pace with demand for memory, programmable logic devices and electromechanical products.

"I don't see the output increasing for us to beat demand all the way through the second quarter, and I think that holds well for the balance of the year," claimed Long.

The impact of the Sun/Oracle integration and IBM's transition from Power 6 to Power 7, which caused some customers to delay purchases, forced down server sales 12% and caused operating margins to fall 80 basis points.

"Our first quarter [ECS] results were impacted primarily by proprietary servers," said Long, "we're working pretty close with [those suppliers] now to see...how much of that decline will continue to take place."

"While we're not satisfied with our levels of profitability in the ECS business, we believe we have the right strategies in place, and we have the right team in place to move forward with these strategies," he added.

Other ECS highlights included a 28% growth rate in virtualisation sales - Arrow distributes VMware and Citrix - while storage was again up in the high 30s.

Proprietary server sales are forecast to return in its fiscal Q3, which explains why the distributor made more modest ECS growth projections for Q2.

Related Topics: Desktop PCs, VIEW ALL TOPICS

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