Arrow Electronics said Tuesday that strong sales of servers, storage and virtualization software helped its first-quarter earnings top Wall Street's forecast.
For the quarter ended March 31, Melville, N.Y.-based Arrow posted revenue of nearly $3.5 billion, up 10 percent from $3.19 billion a year earlier. On a pro forma basis, taking into account the impact of acquisitions, including Alternative Technologies and KeyLink Systems Group, Arrow's sales rose 5 percent.
Arrow's first-quarter earnings rose rose 18 percent to $96.3 million, or 77 cents per diluted share, compared with $81.6 million, or 66 cents per diluted share, in the year-ago quarter.
Financial analysts had projected earnings per share of 75 cents, according to Thompson Financial.
"We see tremendous strength in industry-standard servers and blades, and we don't see downward pressure on the margins as we continue to sell in a solutions environment. We're not fulfilling straight demand. We're actually creating demand in a rather complex IT solutions sale," Kevin Gilroy, co-president of Arrow Enterprise Computing Solutions, said in a conference call with analysts.
"We see strength there, and we see our go-to-market strategy of selling solutions and complex IT environments winning in the marketplace. As far as virtualization, we may be the leading distributor of virtualization software for both the storage product line and the server product line," he said.
Server sales are being driven by the adoption of virtualization in midmarket and enterprise accounts, according to Gilroy.
"Virtualization is wrapped around the vast majority of our server sales," he said. "In the enterprise space, there clearly is some optimization of CPU throughput and CPU processing by virtualization software -- so maybe less servers. But we also believe virtualization is enabling swap-outs of old year for new year."
Arrow reported that computer product sales in the first quarter jumped 33 percent year over year to $776 million. Arrow ECS sales climbed 12 percent on a pro forma basis, taking into account the acquisitions of Alternative Technology and of U.K.-based storage and security distributor InTechnology. The KeyLink was completed March 31, the last day of the first quarter.
For the second quarter, Arrow expects sales of $3.85 billion to $4.15 billion, with computer product sales totaling between $1.125 billion and $1.275 billion. Earnings per share on a diluted basis are projected to be between 78 cents and 84 cents, up 1 percent to 9 percent year over year.
Arrow shares were trading at $39.37 Tuesday morning, down 4.17 percent.
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