Synnex Sees 2Q Growth; Non-U.S. Business Lags

Synnex President and CEO Bob Huang said the company's Mexican operations lost $660,000 in the second quarter compared with $400,000 in its fiscal first quarter. "We know what the problems are and the bleeding should start to stop," Huang said in a call with analysts following the company's earnings report. He said the problems were largely due to a weak Mexican economy and difficulty in collecting accounts receivable.

Synnex reported a 45 percent jump in net income for its fiscal second quarter. The Fremont, Calif., distributor, which went public last December, said net income for the period reached $10.2 million, or 34 cents per share, compared with $7 million, or 28 cents per share, for the year-earlier period.

Revenue increased 35 percent to $1.27 billion compared with $945 million for second-quarter 2003. Huang said an overall improved U.S. distribution economic environment and growth in the company's assembly business helped fuel the increase.

Analysts had predicted that Synnex would have a tough fight in expanding its international business against larger, more-established rivals Ingram Micro and Tech Data. But Huang cautioned, "We are not looking at new foreign expansion."

Huang also said that aggressive pricing by the distributor would not be a big contributor to new market-share gains. Rather, he said that hiring new salespeople would drive the gains. The company hired 45 new salespeople during the quarter and was two-thirds of the way toward its goal of hiring 200 new sales employees, he added.

Late last year, solution providers said that Synnex was aggressively pricing certain products, notably from Hewlett-Packard, in an effort to gain share from Tech Data and Ingram Micro. Synnex said that during the second quarter, HP, its largest vendor partner, accounted for 28 percent of its overall distribution business and IBM accounted for 11 percent.

Synnex said it expects third-quarter revenue to be in the $1.25 billion to $1.3 billion range with net income falling in the range of $10.1 million, or 33 cents per share, to $10.7 million, or 35 cents per share.