Electronics Distributors: Customer Base ‘Cautious’

Now that the industry's two largest distributors have posted quarterly results, it's pretty clear that electronics customers are proceeding with caution on component orders.

{complink 453|Arrow Electronics Inc.} and {complink 577|Avnet Inc.}, which together represent virtually all component manufacturers and more than half the electronics distribution market in certain geographies, say end customers are pushing orders out. Customers are not canceling orders, but they are delaying them until the demand picture gets clearer, according to distribution executives.

Avnet posted unexpectedly soft results for its fiscal fourth quarter, which ended June 30.

“What we saw in June was weaker than we expected,” Harley Feldberg, global president of Avnet Electronics Marketing, said in a call with industry analysts. “However, in the first five weeks of the September quarter, we haven't seen anything to indicate that there is significant backlog. What we are seeing is an increasing degree of conservatism and a cautious approach to orders.”

In particular, Avnet's core customer base of small and midsized industrial OEMs, particularly in the Americas, are experiencing very modest growth.

For its fiscal fourth quarter, Avnet posted revenue of $6.31 billion, which was at the low end of its previously announced expectations. Gross profit and operating income margins were flat from the fiscal third quarter, and adjusted operating income decreased 13.7 percent from a year earlier to $233.9 million.

Avnet EM's revenue for the quarter decreased 5 percent from a year earlier to $3.76 billion, also at the low end of expectations. Its global book-to-bill dropped below parity.

7 comments on “Electronics Distributors: Customer Base ‘Cautious’

  1. _hm
    August 8, 2012

    Is this related upcoming US election?


  2. elctrnx_lyf
    August 9, 2012

    Will this trend continue fro the rest of the year? or do they see any improvements in the sales projections.

  3. Eldredge
    August 9, 2012

    The results Arrow experienced make sense in view of the industry sentiment – order expectations are set, then delayed (but not cancelled).

  4. Anand
    August 9, 2012

    Is this related upcoming US election?

    @_hm, I dont think this has anything to do with US election. Althought US election will create bit uncertainity but the main problem is European crisis. Lets hope countries like Greece and Spain will come out of slowdown and help boost market sentiment.

  5. Anand
    August 9, 2012

    virtually all component manufacturers and more than half the electronics distribution market in certain geographies, say end customers are pushing orders out.

    Good to know that Customers are pushing the orders out rather than cancelling the orders. This clearly shows that Customers are optimistic that things will improve in coming quarters.

  6. Barbara Jorgensen
    August 9, 2012

    I don't think the upcoming election is dragging the orders as much as worry about the global economy (which is distantly related.) For example, I think the US is finally realizing things in the EU aren't going to magically improve, and that no president is going to bring back manufacturing jobs no matter how many promises are made. I am definitely getting the feeling that there is a pause going on — a correction, if you will — because things seemed a lot better three months ago.

  7. _hm
    August 9, 2012

    @anandvy: Yes, I agree. Euro crisis is major hurdle and it effect even economy at large.


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