Arrow bounced back in Q2 with the European acquisition of COMPUTERLINKS helping to keep its growth positive. Second quarter sales of $5.7 billion were above the midpoint of guidance and overall and adjusted for the impact of acquisitions and changes in foreign currencies, total sales increased 1% year-over-year.
Enterprise computing solutions (ECS) grew 10% year-over-year and was flat globally adjusted for acquisitions. Operating income grew 12%, and billings grew at a mid-single digit rate year-over-year adjusted for acquisitions. Sales in the ECS business were $2.1bn, driven by continued growth in the software and services businesses and by a rebound in hardware-related business, following a spending pause during the first quarter.
"In enterprise computing solutions, we continue to move forward on our strategic transformation towards selling comprehensive solutions with a focus on the higher value segment targeted at the data centre. Our comprehensive solutions addressed enterprise customers' entire needs, be they on-premise, in the cloud or a hybrid combination. Both global components and enterprise computing solutions are benefiting from the growing demands to generate and capture data from a proliferating variety of Internet-connected devices and security transmit, analyse and store that data," Michael J Long, CEO told analysts.
In the Americas, ECS sales grew 34% quarter-over-quarter and grew 1% year-over-year. In Europe, sales grew 17% quarter-over-quarter. Europe sales in constant currency advanced 26% year-over-year, primarily due to the acquisition of COMPUTERLINKS. Adjusted for the impact of the acquisition, sales declined 1% year-over-year in constant currency in Europe.
"COMPUTERLINKS brought us new capability, new reach. And if you look at our European performance, we had record sales, record operating income and record operating income percent in Europe. So that's a big validation of that strategy that's paid off. And so when you look even deeper below that, security is growing at 9% worldwide for us."
In both the Americas and Europe year-over-year, growth in software and services were offset by a decline in proprietary servers. Enterprise computing solutions gross margin advanced year-over-year due to the more favourable mix of security infrastructure software as well as services. Operating income grew 20% year-over-year in the second quarter, and operating margin of 4.8% was up 40 basis points year-over-year.
"Proprietary servers year-over-year are down about 17%. That's why I'm really ho-hum on the IBM changes. There's really just not that much there that's worth going after. But our services business and software business is up 11% and 15%, respectively, towards that number."
"What we've really seen in the services piece is North America's a little bit ahead of Europe in growth. Europe's around 7% on the services side. And on the software side, Europe is actually leading North America by the same kind of few percentages as you saw services the other way. So the good thing about what we're seeing is that the business is learning from each other, region to region."