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Arrow Boosts Digital Marketing Investment To Drive E-Commerce Sales Around Enterprise, Cloud And IoT Business

The Centennial, Colo.-based distributor reported record third quarter revenues of $6.95 billion on Thursday, a 25 percent increase year-over-year. More web-based sales through partners will help build more repeat business, according to CEO Michael Long.

Arrow Electronics is investing more in digital marketing to drive IT partner sales through the web.

Michael Long, chairman, president and CEO of the Centennial, Colo.-based distributor, said the high-margin potential of Arrow's enterprise solution business – which includes its digital platform, cloud capabilities and a "game-changing" opportunity around its IoT practice – warranted the increased financial support.

"It's brand awareness and the knowledge that your digital business is out there," Long (pictured) told Wall Street analysts during the company's quarterly earnings call on Thursday. "You build that brand. That is how you get moved up-channel so customers can find you, try your platform, try your services and get involved."

[Related: Pivot3 Signs With Arrow To Bring Its Hyper-Converged Infrastructure To Partners]

Enterprise competitor Tech Data has been building a more personalized e-commerce user experience since its acquisition of Avnet TS, a move aimed at driving renewals and special price purchasing. Arrow has seen a high rate of repeat purchases from partners engaged through its online portal, Long said, and his team's marketing push should plant the seeds for future digital business growth.

"This additional expense is designed to get more people to the site. Once they're there, and they go on the platform, they like what's there, they come back, they tend to grow," Long said.

Arrow plans to continue building its digital presence through marketing, provided the investment still generates demand and creates new business. Long said the distributor is tracking ROI through a handful of metrics, such as site hits, number of customers engaged, customer segmentation and which practice areas draw interest, such as its design business.

Company executives did not disclose the ratio of those investments across its various digital segments.

Arrow did note that while new business has accounted for a large portion of its yearly run rate, which is still projected to reach $1 billion in 2017, design activity has not affected those figures yet because those services are just beginning to launch. The company said it's still six to eight months away from realizing gains from design practice wins.

"We will be tracking our design wins on those news customers and exactly what's coming in, so we'll be able to forecast uplifted margin over time," Long said.

Arrow's enterprise computing solutions segment grew 3 percent in comparison, driven in part by a 2 percent decrease in Americas sales, but Long said those results were on the high end of company expectations. European operations in particular netted better-than-anticipated gains, growing 16 percent year-over-year.

Global components sales increased 25 percent year-over-year for Arrow, with the Americas, Europe and Asia all growing at a nearly equal rate (24 to 25 percent), to highlight a record-breaking quarterly sales result. The distributor attributed the performance to new and expanded supplier agreements as well as strong growth around its digital platform and sustainable technology solutions.

Overall, Arrow reported revenues of $6.95 billion for the third fiscal quarter ended Sept. 30, up 17 percent from last year's third-quarter mark of $5.94 billion. That beat Seeking Alpha's projections by $370 million.

Net income for the quarter was $135 million, or $1.50 diluted earnings per share, up 14.4 percent from $118 million, or $1.28 diluted per share, compared with the year-ago quarter. On a non-GAAP basis, Arrow saw net income of $163 million, or $1.82 per share, up 14 percent from $143 million, or $1.56 per share. Those results were in-line with Seeking Alpha's projections.

Through the first nine months of fiscal 2017, Arrow has netted $19.18 billion in sales – a year-over-year increase of 10 percent – and expects total fourth-quarter revenue to fall between $7.2 billion and $7.6 billion.

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