From: Reuters
Published April 15, 2008 01:11 PM

Avnet warns of profit miss, shares fall

NEW YORK (Reuters) - Avnet Inc <AVT.N> said on Tuesday that quarterly earnings would be well below targets, citing lower rebates as well as weaker-than-expected demand for its chip and computer resale business.

Avnet, which distributes products for companies including International Business Machines Corp <IBM.N>, Hewlett-Packard Co <HPQ.N> and Intel Corp <INTC.O>, saw its shares fall more than 12 percent on the New York Stock Exchange after what it said was an extremely disappointing preliminary report.

Avnet estimated earnings for its fiscal third quarter, ended March 29, of 74 to 76 cents per share before items such as restructuring charges. This compared with average analyst expectations for 86 cents, according to Reuters Estimates.

The warning came ahead of earnings from computer chip market leader Intel, scheduled for Tuesday afternoon.


Avnet blamed the earnings shortfall on weakness in its technology solutions business which sells server computers and other computer products from companies such as IBM, Sun Microsystems Inc <JAVA.O> and Microsoft Corp <MSFT.O>.

It said that delayed purchases by a couple of large customers in North America was a major contributor to the quarter's shortfall while weaker than expected sales in Europe were partly offset by exchange rates.

Avnet also said that lower-than-expected revenue in certain segments also resulted in substantially lower rebates from suppliers and it also cited significant changes in a major information technology supplier rebate program in its Europe, Middle East and Africa region.

It also cited weaker than expected demand for this unit in Europe where it saw sales decline.

The company said revenue from its electronics marketing segment, which sells chips and other components, was about $70 million below the midpoint of guidance, with revenue from all of its regions finishing somewhat lower than expected.

It said in a conference call with analysts that it had factored in further purchasing delays for the current quarter for its computer business but that its chip business appeared to be following typical seasonal trends so far.

Chief Executive Roy Vallee said in a statement that "a confluence of issues contributed to a very difficult quarter" but said that economic weakness was only part of the problem.

"Although our results are being negatively impacted to some extent by the softening economic environment, we are not seeing a significant broad-based slowdown in business or unusual pricing pressure," he said in the statement.

Avnet said third-quarter sales would be about $4.42 billion, compared with average analyst estimates for $4.44 billion.

The company said results for the March quarter would include about $10 million of charges for integrating recently acquired businesses and cost-cuts in response to difficulties at certain business units. It said the cost-cutting actions taken at the end of the March quarter were aimed at reducing annual expenses by $15 million.

For its fiscal fourth quarter Avnet forecast earnings of 79 cents to 83 cents per share, excluding restructuring, integration and other items. This compared with the 91 cents per share expected by analysts, according to Reuters Estimates.

Avnet forecast sales of $4.55 billion to $4.75 billion. Analysts on average had been expecting fourth-quarter sales of $4.7 billion.

It said it is taking further actions in the current quarter to cut annual costs by another $23 million to $27 million, resulting in a charge that would be more than offset by a roughly $38 million pretax gain on the sale of its interest in Calence LLC, completed on April 1.

Avnet shares were down $4.01 at $28.32 in afternoon trade on the New York Stock Exchange.

(Reporting by Sinead Carew; Editing by Steve Orlofsky, Phil Berlowitz)

Terms of Use | Privacy Policy

2017©. Copyright Environmental News Network