From the channel perspective, it appears that the inventory correction that has dogged the electronics industry for the past few quarters is over.
Component leadtimes have expanded "modestly," Avnet Inc. (NYSE: AVT) executives told analysts during today's earnings conference call. Longer leadtimes means there is less component inventory immediately on hand. Regional book-to-bill ratios, which indicate whether supply and demand are in balance, are at or above parity, according to Harley Feldberg, president of Avnet Electronics Marketing Global. A book-to-bill of 1:00 indicates orders are growing; a book-to-bill below 1:00 indicates demand is soft.
"Our view is that it appears that most of the correction that was derivative of the inventory excess has played through and we have seen a modest expansion of leadtimes," Feldberg said. "That is telling us we are at the bottom of the supply chain correction."
Component prices are not expected to increase despite longer leadtimes, and prices of hard disk drives, which had spiked after last year's flooding in Thailand, have declined, according to Feldberg.
For the quarter ended in March, Avnet’s revenue was $6.28 billion; a decrease of 5.9 percent year-over-year. Adjusted operating income of $235.4 million decreased 8.4 percent from the year ago. Additionally, the company notified us:
Avnet Electronics Marketing successfully managed through the short-term inventory correction that negatively impacted organic growth during the first three quarters of Avnet’s fiscal year and appears to be nearing an end, as sequential revenue growth returned to more normal seasonal trends and book to bill was at parity for the quarter. Avnet Electronics Marketing saw sequential revenue growth of 4.5% and grew operating income 2.5 times faster than revenue. The Americas region of Avnet Electronics Marketing experienced revenue growth of 10.8% year-over-year and 2.5% sequentially. Inventory levels are consistent with growth expectations going forward, and have declined by 2% (after adjusting for acquisitions and currency). Inventory velocity at Avnet Electronics Marketing has improved as well, with inventory turns increasing nearly half a turn to 6.1.
Read the full earnings release here.
Europe continues to be an uncertain market, executives said. The region's book-to-bill lagged the Americas and the Pacific Rim, although it showed consistent growth for the first three weeks in April.