Avnet planning more cost cuts

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Avnet planning more cost cuts

Paul Kunert

Despite expectations that the recessionary conditions may lift in the not-too-distant future, Avnet plans to cut a further $25m worth of expenses from the business by September, in addition to the $200m already saved this financial year.

The distributor has reported a 16.3% decline in revenues to $3.7bn for the fiscal third quarter revenues ended 28 March 2009, this drop would have been 10.5% if foreign exchange rates were more favourable.

Profits fell more than 83% year-on-year to $18m, including £32.7m in restructuring costs relating to a workforce reduction and $10.9m in other charges. In October and January Avnet indicated it planned to cut costs, including some redundancies.

"In addition to the $200m of annual cost reductions previously announced, we are initiating another $25m of annualised expense reduction which we expect to complete by the end of September," said Roy Vallee, chairman and CEO at Avnet.

In an interview with Microscope last year, Vallee predicted that the worst of the recession would be over by mid-2009 and he echoed those comments again, albeit with some caution.

"There are still many questions on the macro economy, but the unprecedented speed with which the technology supply chain reacted to the global demand slowdown suggests that we are getting closer to the bottom of this cycle," he said.

The Electronics Marketing arm saw revenues fall 20.1% to $2.1bn.

Sales in the Technology Solutions (TS) division were down 10.9% to $1.6bn - down 3.8% excluding currency translations - with the EMEA region posting the steepest decline in sales of 15.7%.

Valee said that while still "tepid" the performance of the TS unit had steadied over the last two quarters, and it had seen relative strength in software, services and vertical market practices.

"Although we are reducing costs in response to the market slowdown, we can continue to invest in higher-growth emerging markets," he said.

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