Product Shortages Impact Synnex Q2 Sales

The Fremont, Calif.-based distributor earned $24.8 million, or 70 cents per diluted share, on sales of $2.03 billion. Analysts were estimating earnings of 68 cents per share on $2.06 billion in sales for the May fiscal quarter. The results also compare to $18.6 million, or 55 cents per share, on $1.80 billion in sales for the year-ago quarter.

Product shortages that may have impacted revenue, said Murai. Also some of the “missing” revenue for Synnex was due to about $90 million in warranty revenue that the distributor no longer recognizes as sales.

“For Q2, we did what we said we were going to do when we updated back in May. We beat the top end of our original guidance range. We did talk about softness of state and local government and some level of product shortage,” Murai said.

Murai said that Synnex experienced shortages in televisions, networking equipment and printer consumables during the quarter, due in part to higher pent-up demand being realized than expected.

“Each category has a different story behind it. In some cases, like networking, it was a more around higher-than-anticipated growth in that market. The [printer] consumables areas is more historic [in nature]. The TV area is undergoing a technology transition between LED and LCD,” Murai said.

Murai said he’s not sure if current networking shortages will ease this quarter or in its fourth fiscal quarter.

“I feel confident about the market and we’re on top of the business as we head into the rest of 2010. Q2 was aided by the release of pent-up demand and ongoing product refresh,” Murai said. “We remain optimistic, while the market can not maintain the exceptional growth of the last two quarters indefinitely. We’re pleased with our progress and position heading into the rest of the year.”

Distribution revenue for the quarter was $2.01 billion, an 12.8 percent increase from the same quarter last year. Global Business Services Revenue accounted for $27.6 million, up 10.5 percent. “For the next half of the year, I can’t be happier with the position we’re in right now. We managed through the recession, we strengthened the foundation of business and continue to invest in growth areas,” Murai said.

For the current quarter ending Aug. 31, Synnex expects earnings between 72 cents per share and 75 cents per share and sales between $2.05 billion and $2.15 billion. The numbers are below what analysts are expecting: earnings of 75 cents per share on $2.17 billion in revenue.

“Strength in IT demand continues to happen. The high-teen [percentage] growth we’ve seen, we don’t expect that to continue through the entire year,” Murai said.

Meanwhile, Synnex also announced that Bob Huang, who founded the company in 1980, is retiring as chairman. Dwight Steffensen, a board member for several years and a former Merisel CEO, has been named non-executive chairman.

“The company is greatly indebted to [Huang] for all that he’s brought to the company,” Murai said. “He is an entrepreneur at heart, but he is one of the few that was able to make that transition from entrepreneur to Fortune 500 CEO. And as a personal comment from me, I think one of the greatest legacies he leaves behind is the people he brought on board and the culture he instilled in the company, a win-win culture where hard work and success is contagious.”