Worst of the recession to be over by mid-2009 says Avnet

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Worst of the recession to be over by mid-2009 says Avnet

Paul Kunert

The IT industry is inherently better positioned to weather the economic storm than in previous tough times says Avnet's CEO Roy Vallee, who has crossed his fingers in anticipation that the worst of the recession should have passed by mid-2009.

Thirty seven years ago Vallee started stocking shelves at a small electronics distributor in Los Angeles and has since risen to the top at one of the largest value added distributors in the world, seeing off a number of downturns along the way.

"Leading up to the collapse in 2001 was a tech bubble where we had excess IT spending driven by a series of unique demand drivers, most notably Y2K and the dot com boom," he said.

Spending as a multiplier against GDP was "really off the charts" he said and when the taps were turned off there was excess inventory burn off which found its way into the pages of Amazon.com and other large online traders.

"This time around spending has been very well controlled and if anything I would argue there has been a bit of under-spend as a lot of corporations have strengthened their balance sheet," he told Microscope.

The supply chain is tighter and inventory levels leaner - in short distribution is a finely tuned beast. In 2001, the tech sector led the downturn and banking was affected, in 2008 the opposite is true, said Vallee.

"My sense is that technology is in a better position than the macro economy and we are going to resume our normal performance of outperforming the broad economy."

The credit market has been closed for a while, which is akin to "cutting off the oxygen supply to the economy", but there will not be any more major banking failures and the lending freeze will start to thaw this year and into next, he predicted.

"I suspect by the middle of next year we will have seen the worst and while we may still be in a recessionary environment we'll being seeing improvements quarter-on-quarter in the economy," he said.

Vallee is not the only senior figure to talk up the state of play after Forrester Research CEO and founder George Colony said the industry had learnt lessons in the 2001 recession that had put it in a relatively stronger position.

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