Technology distribution company, Avnet (AVT) expanded its technological solutions portfolio by announcing the availability of converged infrastructure solutions powered by Intel’s (INTC) Ivy Bridge Processors for its channel partners in the U.S. and Canada.
These converged infrastructure solutions are based on SAP (SAP) HANA and Cisco’s (CSCO) data center technology with the storage being provided by EMC and NetApp. These solutions are used by companies that deal in Big Data and cloud computing technology.
Avnet has the reputation of converging multi-vendor solutions that cater to the customized needs of its clients. Apart from this, the company is a key distributor of electronic components and computer products. It offers a wide range of products such as semiconductors, computer products, passives and electromechanical connectors. Thus, the company’s revenues depend on the overall IT spending environment.
Per the U.S. research firm Gartner, overall IT spending is expected to grow 2.1% in 2014 and 3.7% in 2015. Although the 2014 forecast was toned down from the earlier projection of 3.1% growth due to soft demand in devices, data center systems and IT services, the research firm expects IT spending to normalize in the 2015-2018 period. The improvement in spending will mostly be driven by enterprise software, IT services and digitalization of business processes.
These predictions bode well for Avnet’s Technology Solutions segment deriving revenues from the distribution of enterprise computing servers and systems, software, storage and related services. In fiscal 2014, revenues from the segment increased 5.7% from the year-ago period.
Nonetheless, a significant portion of Avnet’s revenues comes from the sale of semiconductors, which is a cyclical industry characterized by changes in technology and manufacturing capacity and subject to significant market upturns and downturns.
Additionally, competition from Arrow Electronics and Ingram Micro remains a headwind.
Currently, Avnet has a Zacks Rank #3 (Hold).
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