Synnex Beats Q1 Expectations, CEO Welcomes Dell To Channel

Dell this week said it had signed a deal to carry fixed-configuration Vostro desktops and notebooks through Ingram Micro and Tech Data in the United States. Murai said Synnex had not had any conversations with Dell about becoming a distribution partner, but he viewed Dell's distribution salvo as a vote of confidence in distributor business.

"I see it as an endorsement of the model, because Dell was one of the last holdouts and I think that itself is a strong message," Murai said. "We have very strong and strategic relationships with the HPs, Panasonics, Lenovos, Toshibas and others of the world and at the end of the day, we view this as an opportunity to strengthen those relationships. HP, for example, is much more than a commodity products company -- they have a broad portfolio of products and services."

It was a confident reaction, in the same tone as the one Murai projected on Synnex's earnings call for the first fiscal quarter of 2009, ended Feb. 28. Synnex's revenue for the quarter was $1.73 billion, down 1.13 percent from $1.75 billion in the first fiscal quarter of 2008.

Net income for the fiscal first quarter was $19.5 million, compared with $16.8 million in the prior year quarter. The distributor beat Wall Street estimates for earnings-per-share at 59 cents per share, while most Wall Street estimates had Synnex at 52 cents per share.

Murai and Synnex's Chief Financial Officer Thomas Alsborg said February was the flattest month of Synnex's first quarter of 2009 but that demand in March was "stabilizing."

"It's hard to call anything these days, but we're seeing some improvement in overall demand for March," Murai said. "I don't know if it's bottom -- there are a number of dynamics out there that are going to continue to drive growth. But I think there's a bit of a backlog of refresh -- people and businesses can't put off refresh forever."

In its guidance for the second fiscal quarter, which began March 1, Synnex said it expects revenue in the range of $1.63 billion to $1.73 billion, income in the range of $15.7 million to $16.7 million, and earnings per share in the range of 47 cents to 50 cents.

Murai said all of Synnex's business lines performed well during the first quarter. However, he said unified communications, especially, was an "area of strategic focus," adding that Synnex would continue to add vendors to its line card for UC, and in particular naming Adtran, Astaro and Panasonic as key partners.

"It (UC) is the talk of the town right now, and there are a number of new manufacturers there," Murai told Channelweb.com. "Microsoft and everyone else are embracing the advantages and benefits the technology is going to bring, and we're partnering with the vendors who we think will be the winners in the long term so we can help our VAR customers create a practice."

Synnex's Global Business Services revenues were $32.92 million in the quarter, up 30.3 percent. Income from operations in Global Business Services was $3.6 million, or 10.85 percent of GBS revenues, vs. $3.1 million or 12.1 percent of revenues a year ago.

Networking, managed services, managed print services and components were all segments that did well in the quarter, Murai said, while servers, software and displays were "slower than average" and printers were "about average."

Those trends were true in both the U.S. and Canada, he added, and Synnex will continue to expand its line card with particular attention "to consumer electronics, more automation, enterprise storage and other enterprise-type solutions."

In terms of VAR education, Murai said the federal stimulus package was a major area of focus, especially with how money is being directed to health care, and green initiatives.

In addition to Synnex's public-sector-intensive Red White and You conference in Dallas last week, Murai said Synnex was also planning road shows, Web resources and stimulus content aplenty at its upcoming Varnex show in Philadelphia.

On the earnings call, Murai also recognized Jim Estill, who on Wednesday resigned from his role as President and CEO of Synnex Canada. According to Synnex, Estill is leaving to pursue other opportunities, and Mitchell Martin, President of Synnex Canada's broadline division, will assume Estill's duties.