SYNNEX’s SHORT-TERM SLOWDOWN

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SYNNEX’s SHORT-TERM SLOWDOWN

 user 2007-01-29 at 9:54:00 am Views: 53
  • #17125

    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.