Despite Q2 Loss, Avnet Execs Say Recovery Is Coming

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The recession is not over just yet, but on Avnet's Q2 2002 earnings call today, Roy Vallee, chairman and chief executive at distributor Avnet Inc., said the technology marketplace may be in the early stages of a new up cycle. While the company reported a net loss of $2.6 million for the second quarter of its fiscal 2002, comparatively speaking, that's good news; the company reported a net loss of $19.2 million for the prior quarter of this fiscal year.

The company's three operating groups--Computer Marketing, Applied Computing and Electronics Marketing--all beat expectations for the quarter. In the computer products area, Avnet expected and got a strong seasonal bounce from IBM sales, but was pleasantly surprised by sales of Compaq, Hewlett Packard and Intel products, as well as its fee-for-service business.

Electronics Marketing sales were down 5 percent on a sequential basis, but the rate of decline slowed for the second consecutive quarter. Vallee believes the December quarter was the trough for Electronics Marketing's sales descent.

As a whole, Avnet Inc. reported Q2 2002 sales of $2.36 billion. A year ago, sales totaled $3.6 billion. On a positive note, Avnet, as a whole in Q2 2002, reduced its operating expenses by $12 million sequentially, and significantly reduced its debt and working capital requirements as well.

Vallee says Avnet Inc. expects Computer Marketing and Applied Computing revenues to be down slightly in the March quarter as a result of historic seasonal trends. But he expects Electronics Marketing to make gains that could offset the difference, resulting in flat performance in the fiscal third quarter of 2002.

Answering questions about his positive outlook for the rest of 2002, Vallee told reporters and analysts that customer forecasts are not his prime indicator. "We are encouraged by bookings, transaction activities--all of the indicators we watch in our electronics marketing business," he said. While he doesn't expect growth in the electronic components area to be robust in the coming quarter, Vallee does expect there to be growth.

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