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Core Networking, Security, New Customer Care Business Drive Monster Q4 for Synnex

Synnex enjoyed massive growth in its fourth quarter, with year-over-year earnings for the distributor soaring 56 percent and annual sales climbing 25 percent.

Synnex notched a monster fourth quarter for sales and profitability due to strong technology sales, a robust holiday season and the integration of IBM's Customer Case business.

The Fremont, Calif.-based distributor saw year-over-year revenue for the quarter ended Nov. 30 surge 25 percent from $3.06 billion to $3.82 billion. This beat Zacks Investment Research estimates of $3.72 billion.

Quarterly non-GAAP earnings also leaped 55.7 percent from $46.7 million last year to $72.7 million this year, or $1.83 per share, topping Zacks predictions of $1.70 per share.

[Related: Synnex To Distribute Promisec Endpoint Security Products]

"I'm thrilled with the accomplishments and results the entire Synnex team delivered in 2014," Synnex CEO Kevin Murai said during the earnings call. "We clearly have entered a new era in our company portfolio and financial results."

Wall Street has applauded the results, with Synnex's stock price rising 5.4 percent to $74.77 in after-hours trading Monday. Earnings were announced after the market closed.

Sales in Synnex's technology solutions division grew by 17.8 percent on a constant currency basis to $3.5 billion, while non-GAAP income was up 30 percent to $95.6 million.

The U.S. saw double-digit sales growth in the fourth quarter, Murai said, while Canada saw more modest sales growth and Japanese sales were flat over a year ago since the nation's economy fell back into a recession.

The distributor enjoyed notable growth in its core networking and security segments, as well as in emerging sectors such as cloud, software and mobility.

"There are exciting changes afoot in both the technology and services industry," Murai said. "We do believe we're invested in the right places."

Synnex's federal government vertical also returned to growth, Murai said, aiding PC sales as activity from the Windows XP refresh dwindled.

The distributor also benefited from a stronger-than-anticipated holiday shopping season, with robust tablet, audio and gaming console sales in its customer electronics division.

For Synnex's Concentrix division, the distributor reporter revenue of $342 million, up dramatically from $52.1 million the year prior due the acquisition of IBM's Customer Care business in October 2013. Non-GAAP income also rose from $3.6 million last year to $29.1 million this year.

Concentrix President Chris Caldwell said Concentrix is investing in the health-care, banking, financial services, insurance and technology verticals to ensure that the division is on pace with all competitors in those sectors in terms of offerings and task performance. That could potentially include mergers or acquisitions, he said.

"We're focused on building a stronger, bigger and better Concentrix," Caldwell said during the earnings call.

For the next quarter, Synnex said it expects earnings of $59.8 million to $61.8 million, or $1.49 to $1.54 per share, on revenue of between $3.38 billion and $3.48 billion. Analysts from Thomson Reuters have projected earnings of $1.45 per share on revenue of $3.38 billion.

PUBLISHED JAN. 12, 2015

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