NEW YORK, April 15 (Reuters) - Electronics distributor Avnet said on April 15 that quarterly earnings would be well below expectations and that revenue would be toward the low end of its target, citing lower rebates and higher expenses.
Shares of the supplier of components for chip makers fell almost 8 percent on 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 unusual items such as restructuring charges.
This compared with average analyst expectations for 86 cents per share, according to Reuters Estimates.
The warning came ahead of earnings from computer chip market leader Intel, scheduled for Tuesday afternoon.
Avnet blamed the shortfall on items such as lower-than-expected revenue at certain units, resulting in substantially lower rebates from suppliers.
It also cited significant changes in an information technology supplier rebate program in its Europe, Middle East and Africa region and "negative organic growth" in local currency in the region.
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 pre-tax gain on the sale of its interest in Calence LLC, completed on April 1.
Avnet shares were down $2.53 at $29.80 in morning trade on the New York Stock Exchange.
(Reporting by Sinead Carew; Editing by Gerald E. McCormick and Steve Orlofsky)
Copyright Reuters 2008. All rights reserved. Users may download and print extracts of content from this website for their own personal and non-commercial use only. Republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks or trademarks of the Reuters group of companies around the world.
Channel News and Analysis 
