Avnet has reported Q3 2016 (ending at the end of March 2016) revenues down, though within its expected range even as the sequential decline was slightly below normal seasonality given an expected drop in select high volume supply chain engagements at EMEA, Asia and weaker than expected demand in certain legacy technologies at Technology Solutions (TS).
Revenue of $6.2bn represented a decline of 10% sequentially as compared with the usual seasonal range of down 9% to down 5%. On a year-over-year basis organic revenue decreased 7.2% in constant currency as TS was down 13.6% and EM (the components business) declined 3.3%. Gross profit margin increased 57 basis points sequentially and 44 basis points year-over-year with both operating groups contributing to these improvements.
CEO Rick Hamada said: "TS revenue came in at the low-end of our expectation as all three regions experienced weaker than expected demand in select areas of legacy data centre products which resulted in organic revenue declining 22% in constant currency as compared with the typical seasonal range of down 19% to down 16%. All three regions were experiencing a double-digit decline".
Year-over-year growth in networking and services was offset by declines in storage, servers and software. Gross profit margin increased year-over-year and all three regions were driven by portfolio actions and product mix.
"Despite the double-digit decline in certain legacy technologies, TS delivered significant growth in areas where we have been investing, such as our all flash array storage business, which grew over 40% and our converged infrastructure solutions business which we were up nearly 20% from a year ago quarter."
The traditional hard drive, the 'spinning disk storage environment', is declining by more than 20%, but about 40% of Avnet's revenue is in the hybrid and all flash array where it sees hybrid arrays growing 15% and all-flash arrays growing at more than 40%. "But net-net that whole storage package for us is down year-on-year, because of that mix today".
Rick Hamada added: "The the area of biggest gap to our expectations was in the north, primarily in the UK. Central region, Eastern region and actually the Southern region are still performing to what we expect."