SYNNEX’s Short-Term Slowdown
Information
technology distributor SYNNEX had a tough fourth quarter. The delayed
launch of Microsoft’s Vista operating system hurt the company, which
has also been digesting a variety of acquisitions. SYNNEX stock fell 6%
on its latest earnings announcement, but fortunately, the problems look
temporary.In the fiscal fourth quarter, revenues increased 9.1% to
$1.74 billion, and net income increased 25.7% to $15.6 million, or
$0.48 per share. That performance lagged the annual results, though, in
which revenues increased 12% to $6.34 billion and net income increased
29.7% to $51.4 million, or $1.61 per share.Going into the first
quarter, the company expects earnings of $0.39 to $0.41 per share, with
sales of $1.57 billion to $1.62 billion.Founded in 1980, SYNNEX is now
the country’s third-largest IT distributor. It has accounts with such
big names as Microsoft, Symantec , IBM, Hewlett-Packard, and Lexmark It
also boasts a global footprint, including 16 distribution facilities in
the U.S., Canada, China, and Mexico.Moreover, SYNNEX has been ramping
up its investments, particularly through acquisitions. As a result,
it’s seen an uptick in expenses and a corresponding hit to its
earnings. (After all, distribution companies are low-margin
businesses.)Its recent buyouts of Telpar (data capture products) and Azerty (ink and toner products) will help bolster SYNNEX’s distribution business.
But its most interesting transaction may be its deal for Concentrix, an
outsourcer for call-center support, database analysis, and
print-on-demand services. Concentrix enjoys higher margins than most of
SYNNEX’s distribution businesses.As for revenues, it seems the highly
anticipated Vista launch had a dampening effect on SYNNEX’s top line.
But Microsoft plans to ship the product at the end of this month, which
could lead to a welcome boost in sales.The next couple quarters could
see an improvement in revenues and profits alike, since SYNNEX appears
to be throttling back on its investments. That could provide a catalyst
to improve investors’ perceptions — and SYNNEX’s stock price — over
the next several months.