Synnex Hunts For More Growth After Revenue Gain

The CEO of Fremont, Calif.-based distributor Synnex believes his company is on track to grow the rest of the year following four consecutive quarters of revenue declines.

During the company's earnings call Thursday for its 2016 third fiscal quarter, which ended May 31, Kevin Murai told investors that Synnex is gaining momentum, driven by the company’s Technology Solutions business, which packages vendor hardware, software, services and support components for its reseller partners.

Murai said Technology Solutions was able to grow faster than the U.S. market, which he said was flat but stable during the quarter. That growth helped Synnex break a year-long, top-line losing streak, with revenue growth that exceeded the company’s and Wall Street’s expectations.

[Related: Synnex CEO: Future Growth Opportunity Lies Beyond Hardware]

Murai said Synnex is on track to sustain that revenue growth during its current quarter to close out the fiscal year.

’Our Technology Solutions business is gaining momentum … our investments are leading to improved sales, increased margins, and strong ROIC [return on invested capital],’ Murai told investors.

The company had difficulty finding its stride after it changed its approach to the market during the second quarter with a heavier focus on profitability in Technology Solutions, a change Murai admitted was likely overdone and cost Synnex revenue opportunities.

But during the third quarter, the distributor captured opportunities in many of its business segments, Murai said, and saw the most improvement in its SMB, communications, security and enterprise solutions.

Synnex reported year-over-year revenue growth of 3.9 percent, to $3.4 billion, beating its own expectations by $150 million. It also reported a year-over-year decrease in non-GAAP net income by 11.2 percent, to $54.8 million, but that beat its own expectation by $1.7 million.

Murai said Synnex expects to maintain that momentum in the fourth quarter with a continued focus on growing segments, such as the SMB and public sector markets.

From a product perspective, Murai said the company’s communications and security products were high revenue generators during the quarter, as were PCs and Google Chromebooks. However, he said sales of commodity printers were softer than average.

He also said that a shift toward cloud solutions across all of Synnex’s markets is leading his company to focus more on its communications solutions, which leverage carrier partners, as well as its security solutions.

Murai said Synnex is looking at those areas of investment as large growth areas for the future, adding that cloud-based software and Software-as-a-Service applications have recently been high-growth areas.

Murai also said the company’s global business services unit, Concentrix, was able to shutter three of its U.S. delivery centers – which included the layoffs of at least 868 customer-care workers and the offshoring of that work to lower-cost locations in Central America, South America and Asia - within the forecasted cost and timeframe. The company also reported the opening of two new customer support centers in India and The Philippines during the third quarter, growing its global footprint.

’For both companies,’ Murai said, ’the growing push to cloud presents many opportunities for Synnex to gain market share by creating new capabilities and [cloud-based] business models that enable the shift.’

In addition, Murai said the consolidating market for business process outsourcing provides many opportunities for Synnex to enhance its position as a leader in customer care.