Avnet Posts 1Q Loss Of $488,000

The results compare with a $600 million loss on $2.2 billion in sales in the year-ago quarter. The year-ago loss includes a $580 million cumulative effect of a change in accounting principle charge.

Operating income of $20 million was up $16 million from the prior-year quarter and represents the first quarterly year-over-year operating income growth, excluding special charges, since the March 2001 quarter.

Sales in the Avnet Computer Marketing division, which includes Avnet Hall-Mark, were down 7 percent sequentially and year-over-year.

"Over the past five quarters, we have experienced relatively stable revenue and have improved earnings per share from continuing operations from a loss of 16 cents per share in the first quarter of fiscal 2002 to breakeven in the current quarter," said Avnet chairman and CEO Roy Vallee in a statement. "Yet we have not seen significant improvement in the technology markets we serve. Therefore, we are taking additional actions to lower costs consistent with our commitment to reasonable profitability at any level of revenue."

Avnet plans to cut about $80 million in costs on an annualized basis by the end of the December quarter, Vallee said. The cuts will include an undisclosed number of layoffs and the closure of facilities across all operating groups, he said.

"We do not expect these actions to impact the company's ability to retain and grow market share. As previously stated, we will continue to monitor revenue growth and make further expense reductions, if needed," Vallee said.

Avnet projected earnings of 5 cents per share for the December quarter, in line with analysts' expectations.

"We expect that our combined computer businesses will grow in the December quarter by approximately 15 percent to 20 percent on a sequential basis," Vallee said. "Expense reductions should enhance profitability and our ability to meet consensus expectations for the quarter ending in March 2003 of 6 cents per share, and the full fiscal year 2003 of 22 cents per share, barring any significant and unanticipated sales declines. While we do expect to see some revenue growth in calendar 2003, we are not depending on that revenue growth for profitability."

Shares of Avnet closed at $8 Thursday, up 49 cents per share, or 6.5 percent.