Avnet, Inc. (AVT) recently completed its previously announced acquisition of value-added IT distributor Amosdec SAS. Headquartered in Paris, Amosdec provides virtualization and storage management solutions.
Amosdec generated revenues of $90 million in fiscal 2010. Management expects that the acquisition will be immediately accretive to the bottom-line and support Avnet to attain a return on capital of 12.5% within two years.
Amosdec will form a part of Avnet Technology Solutions, EMEA. Amosdec is recognized for its expertise in VMware virtualization technology and for its leadership in introducing new VMware ecosystem solutions in France.
France is EMEA’s third largest IT market. Avnet will expand its footprint in Europe by leveraging its strength in data center and Amosdec’s position in software and services. Further, the company expects to provide new business opportunities with integrated and cost-effective solutions to its partners.
Avnet expects to continue pursuing strategic acquisitions as a part of its overall growth plan, with its focus directed primarily at smaller targets in markets where the company has been seeking to expand.
The company earlier acquired Bell Micro and Tallard, which will firmly establish Avnet as a leading value-added IT distributor in the fast-growing Latin American region. Further, other acquisitions such as itX Group Limited, Broadband Integrated Resources and Unidux Inc. are also likely to fuel revenue growth.
However, we believe that this aggressive acquisition strategy puts pressure on margins. Thus, we have a long-term Neutral recommendation on the stock and prefer to wait on the sidelines until we see an expansion in margins and realization of synergies from acquisitions.
The stock currently carries a Zacks #4 Rank, which translates into a short-term rating of Sell, due to near-term pressure on margins.
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