Arrow to Buy Waching’s Wireless Biz (ARW) (AVT)

Arrow Electronics, Inc. (ARW) recently announced that it will acquire all the assets and operations of the wireless and infrastructure business unit of Waching Company Ltd.

China based distributor, Waching is well positioned in the fast growing wireless and infrastructure market.

The company has operations in Shenzhen, Shanghai, and Beijing and will report sales of $33 million in 2012.

Arrow expects that the acquisition will to propel the company’s expansion into fast growing Asian markets.

Electronic components and computer products distribution is a low-margin business and Arrow, being a player in this market, has retained a keen eye for profitable acquisitions. The company has completed five acquisitions during the first six months of 2012.

These acquisitions are will likely to enable Arrow to enter new markets, diversify and broaden its product portfolio and maintain its leading position in the global market. Moreover, the company’s continuous acquisitions are expected to be a good contributor to its revenue stream going forward.

Arrow has a well-diversified business spread across geographies, products and markets. Backed by worldwide acquisitions across the world, cost effective strategy and operating excellence, the company hopes expects to drive its profitability, going forward.

Last month, Arrow entered into a distribution agreement with Altia, Inc. The venture undertaken is to aimed at directly distribute distributing Altia’s advanced and customized graphical user interfaces with the help of the company’s key silicon partners. By adding these solutions to its offerings, Arrow will be engaged in supporting various companies, which use less costly or high power graphics.

However, it should be noted that Arrow is subjected to significant competitive pressures from the likes of Richardson Electronics Ltd. (RELL) and Avnet, Inc. (AVT).

Avnet’s operating unit, Avnet Electronics Marketing Americas, recently entered into a distribution contract with Measurement Specialties, Inc. (MEAS). Hence, to compete successfully, Arrow must excel in terms of product quality and innovation, customer service, technical and computing capabilities and price competitiveness.

We also maintain a long-term ‘Neutral’ recommendation on the stock. Our recommendation is supported by a Zacks #3 Rank on the stock, which translates into a short-term rating of Hold.