Synnex Files For IPO, Reports Distribution Sales Up 19.5 Percent

Synnex filed a preliminary prospectus with the Security and Exchange Commission Friday, disclosing that sales increased 9.1 percent to $1.84 billion for the six months ended May 31 over the prior-year period, while earnings were up about 4 percent to $13.7 million.

The filing did not disclose how much Synnex hoped to raise or how much of the company it planned to sell in the offering. Nor did the filing disclose how much ownership Mitac International Corp., which currently owns 98 percent of Synnex, would retain in the company after the IPO.

The company paid registration fees based on an estimated $92 million maximum offering price, the filing showed.

Synnex's contract-manufacturing operations, which have included large OEMs such as Compaq and Sun Microsystems in the past, have been steadily declining over the past three years while its distribution sales have been rising, the document disclosed.

The company's distribution sales rose 19.5 percent to $1.47 billion over the six-month period, which the company attributed primarily to its acquisition of Gates/Arrow Distributing in May 2002 and the start up of operations in Mexico the following month.

The company's contract manufacturing revenue, meanwhile, dropped 60.9 percent to $85.1 million over the same period. The company further disclosed that 95.7 percent of contract-manufacturing sales during the period came from one customer, which the filing did not disclose.

Three years ago, contract manufacturing accounted for almost 43 percent of the company's sales, until it lost a major contract to assemble systems for Compaq Computer in fiscal 2001, the statement said.

Going forward, Synnex executives stated that the company plans to grow its distribution business by adding product lines and expanding internationally, as well as possibly through acquisitions.

Synnex, which some competitors blamed earlier this year for aggressive price-cutting, reported that its gross margins dropped to 4.6 percent of revenue from 4.8 percent of revenue over the period. However, company executives said gross margins on distribution revenue remained about the same, pointing to the decline of its higher-margin contract-manufacturing business as the cause.

The company's largest vendor was Hewlett-Packard. Synnex derived about 31 percent of its revenue during the period from the sale of HP products.

Bear, Stearns and Co. Securities, Banc of America and Raymond James were listed as handling the offering.