Arrow Q2 sales and profits up but components oversupply could affect Q3


Arrow Q2 sales and profits up but components oversupply could affect Q3

Billy MacInnes

Arrow Electronics posted record Q2 sales up 20% to $5.54bn and net income up 34% to $156.2m but admitted a "modest oversupply" in inventory in Europe at the end of the second quarter would temper growth in the third quarter.

Sales were boosted by favourable currency exchange rates and acquisitions - without them, total revenue would have risen by 3%. 

Global component sales generated $3.88bn, up 19% year on year while enterprise computing solutions (ECS) rose 23% to $1.66bn. 

Chairman, president and CEO Michael Long described component sales growth as strong "although slightly below our expectations for another quarter of above seasonal growth".

In a conference call with analysts, transcribed by seeking, chief financial officer Paul Reilly predicted Q3 sales in the core global components business would be "in line with the low-end of normal seasonality reflecting a modest oversupply of inventory in the supply chain at the end of the second quarter". 

Long said the ECS business reported record Q2 revenue driven by "impressive year over year growth in all of our product lines", with proprietary servers, industry-standard servers and software growing in excess of 25%.

He revealed that Arrow was starting to see an increase of services through its reseller base in the computer products business "that we haven't seen before, and believe that will keep a consistent growth prospect for us, as IT looks like it's going to continue to be fairly strong for the second half of the year".

He added that it would "continue to expand with our services and product portfolio expansion into the near future".

In its results for the six months ending 2 July 2011, Arrow also took a charge of just under $5.9m for the "settlement" of a legal matter and a gain of just over $1m on bargain purchase related to the acquisition of Nu Horizons Electronics.

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