Avnet Reports Flat IT Sales

Broad line distributor Avnet reported that its Technology Solutions group sales reached $1.95 billion in the fourth quarter of 2008, up 9.9 percent year over year but flat on a pro forma basis that excludes currency conversions and acquisitions. Technology Solutions is the company's IT distribution arm.

Avnet said sales in Asia for Technology Solutions fell 11.3 percent, due primarily to lower sales of microprocessors and memory there. Avnet said it is the largest Advanced Micro Devices distributor in the world, and sells AMD microprocessors to system builders in Asia.

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John Paget, president of Avnet Technology Solutions Global, told Channel Insider that the lower sales in Asia came from lower demand and not a supply problem.

"We don't know how much it was affected by the earthquake, but I wouldn't want to blame it on that," Paget said.

Additionally, Avnet said while server sales were up sequentially after a big sequential drop in the third quarter, total server sales were down 18 percent year over year in the fourth quarter. However, Hewlett-Packard and IBM server sales were up, while Sun Microsystems' were down year over year, Paget said.

And while at the end of the third quarter several deals slipped from one quarter to the next, causing a shortfall on expectations in that quarter, that didn't happen in the fourth quarter, Paget said.

"We had almost no slippage this quarter," he said. "We basically returned to what we would consider normal cyclicality for the June quarter."

Avnet's shift to selling more services is paying off too, according to Paget. Virtualization and consolidation were also among the most sought-after technologies in the quarter, with Avnet's practice and consulting business growing substantially over the past year.

"We are seeing a solid shift to the strategy," Paget said. "If you went back a year ago and looked at percentage of our revenue that is servers, it is decreased. At same time, practices we wanted to be in and our service business [are] growing quite substantially. We are reacting to the market and the market is reacting to us. That's not to say our server total volume has gone down. Our volume has increased dramatically in total."

Looking forward, Avnet's management expects the first quarter to reflect normal seasonality in both its electronics and Technology Solutions business units. Avnet said it expects Technology Solutions sales to be in the range of $1.88 billion to $1.98 billion.