Avnet: Profits Up, Sales Down Due To Hard Drive Price Spike

Avnet shares fell slightly Thursday afternoon after the company reported its second fiscal quarter earnings for the period ended Dec. 31.

The Phoenix-based distributor's sales were $6.69 billion, slightly below analysts' expectations of 6.74 billion and also down from $6.77 billion in the year-ago quarter. Avnet earned $147.2 million in the quarter, or 98 cents per diluted share, up from $141.0 million in the year-ago quarter. Earnings per share were 98 cents, but $1.15 before restructuring charges. Analysts had estimated earnings of $1.04 per share before charges.

Overall margin improvement despite lower revenue was due in part to a price spike in hard drives due to the severe flooding in Thailand, according to Avnet executives.

Shares closed at $33.58, down 26 cents or 0.8 percent, Thursday afternoon.

Avnet Technology Solutions reported $3.10 billion, down 3.5 percent compared to the year-ago quarter but up 2.5 percent in pro forma revenue. Avnet Technology Solutions sales in the Americas were $1.65 billion, down 9.6 percent from the year-ago quarter. Phil Gallagher, global president of Avnet Technology Solutions, characterized the performance of that group as solid, though the close of the quarter was not strong.

"It was a slightly tougher December close, but still satisfactory to us. We did have some backlog that we didn't get out. It was nominal in the grand scheme of things but it added to a little bit of shortness," Gallagher said in a conference call with analysts.

Hamada added that industry-standard servers and software sales each increased by more than 35 percent and storage solution sales increased more than 20 percent.

On the semiconductor side of the business, Avnet Electronics Marketing reported $3.60 billion, up 1 percent compared to the same period last year, but down 3.5 percent in pro forma revenue.

Avnet expects third-quarter revenue between $5.95 billion and $6.55 billion and earnings between 94 cents and $1.02 per share. Analysts were projecting earnings of 95 cents per share on sales of $6.33 billion. Avnet Technology Solutions is expected to report sales between $2.40 billion and $2.70 billion, according to the distributor.

Avnet also said it has repurchased more than eight million shares for $226 million as part of a stock buyback program. The company will continue to repurchase shares as long as the price remains reasonable, executives said.