Synnex CEO: Tech Data-Avnet Deal Validates Our Business Model

Tech Data's $2.6 billion purchase of Avnet's Technology Solutions business underscores the value of Synnex having both a strong broadline and enterprise footprint, according to Synnex CEO Kevin Murai.

"The combination of Avnet's TS business and Tech Data drives more toward the model that we've had for years, which is a hybrid [broadline and enterprise] model," Murai said Monday during the company's earnings call. "We see change coming, and we think we're well-positioned for that."

Murai said the Fremont, Calif.-based distributor has made investments in the parts of the business that really play into technology change such as Hyve Solutions, which serves the hyper-scale data center build-out market, and the CloudSolv community, which plays to the as-a-Service cloud computing environment.

[RELATED: Synnex Snaps Up BPO Provider, Boosting Concentrix Business]

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In the short term, Murai said Synnex is looking to earn more market share as Tech Data and Avnet go through the acquisition, which was announced last week and is scheduled to close in the first half of 2017.

"We see opportunity to really demonstrate the value that we have in the marketplace," Murai said.

Synnex also expects to benefit from HP Inc.'s $1.05 billion purchase of Samsung Electronics' printer business since Murai said the distributor already has a specialty business focused on the higher-end printer and copier business. Murai said the deal will enhance HP Inc.'s A3 business and A3 supply chain.

"Anything that's good for HP Inc. usually translates into being good for us as well," Murai said. "I think this plays very, very well into one of the strongest capabilities that we have in the marketplace."

HP Inc. is Synnex's largest vendor, accounting for 16 percent of its sales in the quarter ended Aug. 31, according to Marshall Witt, Synnex's chief financial officer. No other vendor accounted for more than 10 percent of Synnex's overall sales, Witt said.

Synnex enjoyed an outstanding performance in its U.S. public sector, enterprise and small- and midsize-business segments, Murai said. The company's Hyve solutions business was also strong, Murai said, as Synnex both ramped up business from newer relationships and executed well among its core customers.

From a product standpoint, Synnex achieved solid growth in its higher-end software, networking and security business, Murai said, as well as with notebook and client device sales. The company's retail and consumer electronics businesses also performed well, he said.

"I am thrilled with our performance," Murai said. "Strong execution and progress in our business strategy drove our solid results."

Canada notched mid-single-digit growth in the most recent quarter, Murai said, while sales and profitability were down slightly in Japan.

Across the whole business, Murai said Synnex saw softer sales in its printer and system components businesses.

Synnex saw revenue climb 10.1 percent in the most recent quarter from $3.33 billion last year to $3.67 billion this year. That trounced Seeking Alpha's estimate of $3.49 billion.

Net income soared 21.9 percent from $48.2 million, or $1.21 per share, last year to $58.7 million, or $1.47 per share, this year. On a non-GAAP basis, net income rose 18 percent from $58.4 million last year to $68.9 million this year, or $1.73 per share, smashing Seeking Alpha estimates of $1.56 per share.

Wall Street reacted very favorably to the numbers, with Synnex's stock climbing 7.4 percent in after-hours trading to an all-time high of $114 per share. Earnings were released after the market closed Monday.

In the most recent quarter, Synnex's technology solutions sales climbed 9.8 percent from $2.98 billion last year to $3.27 billion this year. The division's operating income jumped 11.8 percent from $71 million last year to $79.4 million this year.

For Synnex's Concentrix division, sales increased 13.1 percent from $359.5 million last year to $406.7 million this year. Operating income for the division skyrocketed 83.3 percent from $10.1 million last year to $18.6 million this year.

Some $36.2 million of that revenue growth is attributable to Synnex's acquisition of business process outsourcing provider Minacs Group, which closed Aug. 1. Murai said the $420 million purchase of Oshawa, Ontario-based Minacs will expand Concentrix's reach in the digital marketing and automotive spaces.

For the next quarter, Synnex said it expects non-GAAP earnings of $82.7 million to $84.7 million, or $2.06 to $2.11 per share, on revenue of $3.83 billion to $3.93 billion. That handily beats expectations from Thomson Reuters analysts, who had projected earnings of $1.91 per share on revenue of $3.79 billion.