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Local distributors report mixed quarterly results

Local distributors report mixed quarterly results

Distributors have reported mixed results for the first quarter of the calendar year

Distributors have reported mixed results for the first quarter of the calendar year, but claim global economic pressures are not to blame.

Last week, Ingram Micro and Avnet reported under-average financial quarterly results to March 31. Ingram CEO, Greg Spierkel, said softness across the US and European markets was putting pressure on its operations in those regions. The distributor reported a 4 per cent year-on-year increase in global revenues to $US8.58 billion for the quarter, with a net income of $US64.1 million.

According to a statement, Ingram's Asia-Pacific sales were $US1.81 billion, an increase of 16 per cent, and accounted for 21 per cent of total revenues.

Avnet also reported a tough January-March, with operating income falling by 3.4 per cent, including charges, to $US166.8 million (off revenues of $US4.42 billion). Operating income as a percentage of sales, excluding charges, was down 62 percentage points year-on-year.

Chairman and CEO, Roy Vallee, said it was extremely disappointed with its earnings during the quarter and reported both operating groups - Electronics Marketing and Technology Solutions - were below profit forecasts. Server sales were also down. US executives blamed the downturn on CIOs postponing big projects in the current uncertain economic environment. Avnet is now restructuring to improve cost efficiencies.

Against the northern hemisphere gloom, Avnet country manager, Gavin Lawless, said the distributor's local figures could not be more different. He was expecting sales to remain strong throughout the rest of the financial year.

"We've not seen the downturn in numbers here - the third [financial year] quarter was an exceptionally strong one locally and we're very happy with the result," he said. "We play into the SME and low-end enterprise markets - we're not exposed to Telstra, the Federal Government, larger enterprises or retail, which are feeling the pinch more. Our space remains very strong and we're not seeing our partners, who sit in that mid-market space, experiencing a slowdown yet."

Dicker Data experienced a softer-than-expected February and March but strong growth in January and April. Sales manager, Chris Price, blamed the March easter holiday for much of the slowdown and said the distributor was now ahead of projections for the current financial year.

"April was strong, so I am positive and forecasting a strong May, June and July," he said.

"We don't work with tier-one retailers or integrators and have a very long tail in terms of the resellers we deal with, so I don't think we have been as affected as others [distributors]."

Ingram Micro sales director, John Walters, said it saw a strong January and February off the back of a successful 2007. But as local interest rate rises began biting, he suggested the Australian market was softening more at the retail end of town than enterprise.

Synnex CEO, Kee Ong, agreed economic issues close to home, such as higher interest rates, and soaring fuel and food prices, were having their effect. While the global Synnex Group continues to do well, Ong added most of the significant growth was coming from Asia and not the more mature markets.

"In Asia, the growth engine is places like China and Vietnam which are still spending big on infrastructure," he said. "In Australia we did have double-digit growth, but we can see the market softening.

"We are seeing signs that resellers are finding it very difficult to comply with their payment terms, so we're trying to help them as much as possible."

Ong was confident Synnex would record solid results in the coming quarter, which is traditionally a strong sales period for distributors, but predicted a challenging year for all and said the industry would definitely see a slowdown.

"The feedback we've had from resellers is that a lot of projects, programs and tenders are being downsized or delayed," he said.


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