Avnet Is Latest Tech Company to Reset Its Sights

Electronics distributor Avnet, whose Technology Solurtons division is a strong force in the channel, has become the latest technology company to report disappointing earnings and take a more cautious stance going forward. The company reported that profit in its fiscal 1Q dropped 12 percent, while revenue grew about 10 percent.

The numbers weren't that bad, although they missed Wall Street projections and indicated that technology solutions sales, which rose 12 percent year-over-year on a reported basis, are weakening in all geographic sectors on a pro forma basis. Roy Vallee, chairman and CEO, noted that the revenue slowdown in technology is "more pronounced" than in the company's Electronics Marketing group. He pledged further "corrective actions" if needed.Avnet's stock fell on the news.

The distributor finds itself in a position similar to many other technology and channel companies right now. U.S. sales growth is weakening, and the hoped-for boost from overseas markets isn't occurring as the situation deteriorates offshore as well. Additonally, the suddently strengthening U.S. dollar is a further drag on overseas earnings. Companies are having to set more realistic -- and lower -- expectations. Just yesterday, Amazon sharply lowered its 2008 outlook. Channel companies are also going to have readjust earnings espectations going forward.

 


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