After Analysts Day, Avnet Rings Out Year On Upbeat Note

On Dec. 17, Vallee, joined by colleagues Rick Hamada, president of Avnet Computer Marketing, and Andy Bryant, president of Avnet Electronics Marketing, finally got their chance. Better yet, they did so on a positive note for Avnet, which saw its shares trade up Tuesday $0.44 to $12.17. That followed a day-long presentation to analysts in New York during which Vallee and his team outlined their strategies for 2003 and confirmed the guidance for the December 2002 quarter they previously provided.

The day was quite a contrast to two years ago when Avnet aborted its planned ceremony at the NYSE. The reason: soft sales of IT products in Asia. When the company disclosed that, Avnet shares plummeted and Vallee canceled his scheduled appearance at the NYSE trading floor.

"That day, in essence, signaled the beginning of the tech downturn. Our hope and belief is that Tuesday was the opposite of that," Vallee says.

Although his company's stock remains under pressure,it's well off the 52-week high of $29.24 it achieved in March, and it gave back $0.72 the day after its executives made their appearance at the NYSE,Vallee is hopeful for next year. At the very least, he says, "things have stopped getting worse."

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"We've seen a very stable level of activity. My outlook is positive, but you could call it cautiously optimistic," Vallee adds.

Vallee, whose company has a hand in everything from board-level components to high-end midrange server systems, believes 2003 will see IT spending improve modestly over levels achieved in 2002, possibly in the low, single-digits. Holding down growth will be the continued weakness in the PC arena, though an anticipated increase in PC upgrades could change that.

Unlike others, Avnet's principal focus these days is return on invested capital. While some are more concerned about growth rates and operating margins, Vallee has his lieutenants focused on getting a basic return for where they put their money. That's one reason why he's so high on software. The margins are relatively low, he notes, but the investment in inventory is minimal.

Another thing Vallee is high on is his company's overhauled IT infrastructure. Among other things, Avnet launched a variety of tools to help its customers, including Applied Computing's FastBuild online custom configuration tool for white-box builders. It also overhauled its back-office and front-office systems to give it a better view into its customers' businesses.

Challenges remain for the company. Additional cost-cutting needs to be completed. And turning around some minds on Wall Street continues to pose a challenge. Merrill Lynch, for example, has a "sell" rating on the stock. But after finally banging the gavel at the NYSE, Avnet has at least taken a symbolic step to pick up from where it once left off.