Evidence from the distribution channel continues to support two positive trends in the electronics supply chain: First, global inventory is finally in balance; and second, bookings are on the rise.
Arrow Electronics Inc. (NYSE: ARW), one of the industry's two largest electronics distributors, told analysts today that its book-to-bill ratio in all regions is above 1:00, indicating demand is catching up to supply. "For the whole segment [of our business], the book to bill was above 1 in each month of the quarter and for the month of April," said Michael Long, chairman and CEO of Arrow, on the company's first-quarter 2012 earnings conference call.
Arrow reported first-quarter 2012 net income of $113.6 million on sales of $4.89 billion, compared with net income of $136.3 million on sales of $5.22 billion in the first quarter of 2011. According to the press release:
Global components first-quarter sales of $3.35 billion decreased 14 percent year over year. “The Americas region performed well while weaker macroeconomic conditions in Asia and Europe have had a negative impact on our results. Our global book-to-bill of 1.04 to 1 is at its highest level in six quarters with sequential increases seen in all regions. Our global teams remain committed to driving increased market share in all regions while providing the highest possible level of service to our customers,” Mr. Long said.
Arrow's Asia/Pacific business had a particularly challenging quarter, according to Long and Arrow CFO Paul Reilly. Arrow has high exposure to the low-end handset business and set-top boxes in the region. As a result, Arrow's components business in the Pacific Rim underperformed expectations. On the upside, said Long, Arrow has seen its design-win business in Asia tick up.
"We saw design activity pick up in 2009 after the big drop, and we have been watching [design activity] for a fair period of time," Long said. "This tells me that products that are destined for production are being designed right now."
Reilly added that Arrow has seen no pricing pressure in its components business, but the distributor is beginning to see leadtimes in some product areas begin to stretch out.