Avnet Shares Hit 52-Week High On Earnings Report

Income hit $105.2 million or 70 cents per diluted share for the third quarter of the Phoenix-based distributor's fiscal 2007, up from $71.2 million or 48 cents per diluted share in the previous year. Restructuring, integration and other charges dropped profits by 3 cents per share.

Avnet's third-quarter sales totaled $3.9 billion, up from $3.61 billion or 8 percent from the year-ago period.

Avnet's Technology Solutions division posted sales of $1.46 billion for the quarter, up 25 percent in part as a result of the acquisition of Access Distribution and the divestiture of Avnet Enterprise Solutions.

ATS President John Paget said that while the company came in slightly below the low-end of its guidance for the quarter, operating income and margin performance beat expectations, and going forward, he expects virtualization to help drive sales growth.

"We're seeing strong, strong growth on a year-over-year basis in industry standard servers. That's blades. But for us that's not a product sale, that's actually a solution sale. That's what I'd refer to as the virtualization sale," Paget said. "We're seeing very good growth there."

Networking and storage were also growth areas for Avent, as well as the memory business, he said. Microprocessor sales were weak, hurting the company's top line.

Margins on business acquired with Access Distribution helped ATS. "Certainly we saw a big surge from that perspective, and while we had anticipated I think the number that was given was $500 million, quite honestly the margins that were produced out of that business was greater than we had anticipated. As we go forward, that's going to start to blur because we're integrating the emerging business into the rest of the emerging business of Avnet," Paget said. "It's more than one plus one equals two."

Avnet expects sales in the Technology Solutions division to be between $1.68 billion to $1.78 billion for the fourth quarter of 2007, with overall sales coming in between $4.1 and $4.3 billion. Earnings are expected between 73 cents and 77 cents per diluted share.

Shares closed at $41.87.