Avnet Technology Solutions chief bullish despite cloudy outlook

Phil GallagherDistributor Avnet reported its fourth quarter and fiscal 2011 results, with record fourth-quarter sales of $6.91 billion helping the company to finish its first-ever year with operating income north of $1 billion.

Within the overall company, Avnet Tehnology Solutions grew more than 41 per cent year over year to finish the year out at $2.95 billion. The distributor saw growth of 60 per cent or better in its core servers, storage and software businesses; increases that ATS global president Phil Gallagher attributes to the ongoing technology refresh cycle.

“I’m sure it’s starting to slow down a little bit, but right now, we’re not seeing it,” Gallagher said.

For the coming quarter, Gallagher expects about status quo – down about six per cent from the recently completed quarter. Even with the uncertainty in the financial markets, he said that “it’s different than 2008.”

“We’re not dealing with liquidity, cash and credit issues,” he said. “Companies will be cautious, but where they can invest in IT as a strategic advantage, as an efficiency and productivity advantage, that will continue. And that’s where we’re focused.”

The company has been helped by acquisitions around the world – recently closing its purchase of France-based Amosdec and Australian distributor ITX.

The former will significantly expand ATS’ currently small presence in France and add deeper services around VMware across Europe, while the latter adds additional software and services practices around Oracle, IBM and other enterprise vendors in Australia, Gallagher said. And both will bring back new ideas for services and best practices to Avnet around the world.

Combining this year’s purchases with last year’s acquisitions of Bell Microproducts and Tallard Technologies, it’s clear that Avnet is on a bit of an M&A spree. Gallagher signaled that may continue, as “acquisitions are still very much on the forefront” of Avnet’s strategy, although it will continue to look for companies that “add value to what we’re doing, maybe introduce slight adjacencies, but really are focused on our core software, services and hardware business.”

Once again, Gallagher said growth in Canada was “in the teens,” continuing a trajectory that has seen Avnet double its business in this country over the last few years. Gallagher quipped that credit for that growth needs to be shared amongst the Avnet Canada team, the distributor’s Canadian partners, and the Canadian government for its role in keeping Canada out of the economic pitfalls that have dogged the U.S. and other regions.

Still, Gallagher said, there’s work to do.

“We need to get more of our SolutionPaths up there, and we need to be asking our resellers what more they need from Avnet, what else we can do to continue to expand their growth,” he said.

Not specific to Canada, but another area where Gallagher said to expect to see more action is on the services side. When it comes to developing and marketing cloud-driven services, professional and managed services, Gallagher said Avnet “needs to step in even more aggressively” in the future.