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Mixed Signals & Mad Money

Given the state of the global economy, it's not surprising there are mixed signals coming out of the electronics industry.

A few weeks ago, {complink 453|Arrow Electronics Inc.}, a $19 billion global distributor (for calendar 2010), reported that although its Book-to-Bill (BTB) ratio had dropped below 1 in late June, July orders were picking up.

Yesterday, during {complink 577|Avnet Inc.}'s earnings conference call, the $26 billion distributor (for fiscal 2011) reported the same trend but hasn't seen its BTB bounce back. (A BTB over 1 indicates orders are outpacing actual sales (or “billings”); a BTB below 1 indicates orders are slowing down.)

Both company executives and market analysts admit they have no good explanation for the disparity.

Although they are two unique companies with distinctive business strategies, Arrow and Avnet are similar in a number of ways. Both represent the leading suppliers across the electronics components lineup in semiconductor; interconnect, passive, and electromechanical; and systems products. Both have a global footprint, spanning the Americas, EMEA, and Asia, and both serve hundreds of thousands of customers across a broad base of the electronics industry. Both companies have grown consistently through acquisition and organic efforts, and executives at both companies have a long and seasoned history in riding out market cycles.

“We can’t explain their Book-to-Bill disparity,” said Harley Feldberg, president of Avnet's global Electronics Marketing business, in an email to EBN. “The market, including Avnet, saw a slowing in the later part of June, and from our perspective, those same conditions have continued into the first six weeks of this quarter. I wouldn’t categorize this as recessionary as much as a stabilizing of the market at a modestly reduced rate.”

The electronics industry is not alone in experiencing mixed messages — NBC News last night said that wild swings in the stock market will continue to be “the new normal.” Although global financial experts can point to the “back story” of the market, no one is forecasting the future. Barring any additional disasters — covering everything from Japan's earthquake to government defaults — distributors are expecting a “normal” seasonal slowdown for calendar Q3.

On a separate but related note, new Avnet CEO Rick Hamada was featured on CNBC's Mad Money with Jim Cramer, who had some favorable things to say about Avnet. Check out the interview at CNBC.

4 comments on “Mixed Signals & Mad Money

  1. techendeavour123
    August 12, 2011

    The electronic industry is the very basic of any technological advancements. The two companies in the discussion being the key players in the electronic field, summing up that the Book-to-bill issue is a non recessionary topic and that is a sigh of relief!

    Thanks for the share.

    iphone application development

  2. FLYINGSCOT
    August 12, 2011

    BTB fluctuations are not uncommon and are affected by seasonal trends.  The markets are so spooked just now it is difficult to analyse what might be “erratic” behavior.  I would let the data trend out over a few more months and see what can be made of that.

  3. AnalyzeThis
    August 12, 2011

    @FLYINGSCOT, I would tend to agree.

    I think it's rather difficult and at times foolish to attempt to much analysis or forecasting in this environment given how bizarre and unpredictable the market is at the moment.

    I think that whole phrase, “the only thing that's for certain is uncertainty” rings especially true now. There are a whole bunch of things right now that just doesn't make sense, so rather than trying to make sense of imperfect signals… I agree, it's probably best to wait and see.

  4. mfbertozzi
    August 14, 2011

    “Wait and see” is maybe best market approach, actually. Financial restrictions are impacting people purchases and it is quite difficult the premonition of new ramps or trends from electronics. I am convinced anyway electonics is “pervasive” for each one of us and maybe the sector will continue its path without strong impact till the end of the year.  Imo, for software or in general IT, scenario is different and not so positive.

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