Arrow Sales Up, But Misses Wall St. Targets

The Melville, N.Y.-based distributor earned $98.3 million, or 79 cents per share on revenues of $4.03 billion, up from $85.9 million, or 70 cents per share, on revenues of $3.45 billion for the same period last year. When restructuring and integration charges and a deferred tax adjustment are taken into account, the company posted earnings of 76 cents per share.

On average, analysts polled by Thompson Financial expected adjusted earnings of 79 cents pre share on revenue of $3.91 billion for the quarter.

Sales of computer products through Arrow's Enterprise Computing Solutions business came in at $1.17 billion, up from $594 million from the previous year, in part due to the company's acquisitions of distributors KeyLink Systems Group and Alternative Technology. The company said, however, that its mix of products and business investments meant to drive future growth had a negative impact on profitability for the quarter.

"One very important part about our results in the quarter are the investments that we're making in the business and the acquisitions are just the forefront of the investment Arrow is making in the ECS business," Arrow ECS co-president Catherine Morris told analysts on the company's earnings conference call on Tuesday.

The company is also making investments in growing its midmarket business, Arrow ECS co-president Kevin Gilroy told analysts.

"We soft-launched this week some of the low-hanging fruit on the midmarket initiative and we'll continue to roll out some of the more compelling parts of it in Q1 '08," he said.

Sales of proprietary servers were low, but an anomoly, Gilroy said.

Arrow expects adjusted earnings between 90 and 95 cents per share on sales of $4.15 to $4.45 billion for the fourth quarter. Analysts expect earnings of 92 cents on $4.28 billion in revenue in Q4.

Shares of Arrow were trading at $39.44, down 7.5 percent, on Tuesday afternoon.