Synnex: Windows 7 Is Spurring PC Refresh Cycle

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"It's a more rapid path than we've seen in at least the past two or three [Windows upgrades]," Murai said during a call with analysts after the company reported its first fiscal quarter financial returns. "If you look at the overall strength of our systems numbers, there's [PC growth] going on for a number of quarters. There is a refresh happening and a lot of that is due in extent to Windows 7."

For the first fiscal quarter ended Feb. 28, Synnex beat Wall Street earnings expectations, while revenue came in just a shade under analysts' projections.

The Fremont, Calif.-based distributor reported $1.94 billion in revenue, compared to $1.72 billion in the year-ago quarter. Analysts had projected a consensus of $1.95 billion in revenue.

Synnex earned $23.2 million, or 66 cents per diluted share, from continuing operations for the quarter, exceeding average Wall Street estimates of 62 cents per share. This compares with net income of $18.0 million, or 55 cents per diluted share in the prior year fiscal first quarter. Net income including discontinued operations, namely the sale of China Civilink (Cayman), was $34.7 million or 98 cents per diluted share.

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"The U.S. market shows increased stability and growth. At the end of last year, we saw the return of high velocity distribution business. In the first quarter, we saw strength in our enterprise, high value portion of the business," Murai said during the call.

Murai said he expected an increased product refresh cycle will continue to help business, particularly thanks to Windows 7 operating system and the upcoming Office 2010 release in June.

"We remain optimistic about overall improving demand environment. In addition, the consumer electronics space continues to do well and we continue to gain momentum in this estimated $178 billion space, especially now that we've closed the Jack of All Games acquisition with a significant footprint in video game market," Murai said.

Revenue from distribution was $1.91 billion in the first fiscal quarter, up 12.6 percent from the year-ago quarter. Synnex's Global Business Services accounted for $26.1 million, a 6.8 percent increase from last year.

For the current quarter ending May 31, Synnex expects a "stable demand environment" and revenue between $1.95 billion and $2.03 billion, which includes a change in accounting for certain service and extended warranty contracts that historically represented about 4 percent of reported sales.

The distributor expects net income in the range of $22.1 million to $23.1 million, or 62 cents to 65 cents per diluted share.

Shares of Synnex closed at $31.75 Thursday, up 70 cents per share.